Social Credit

SOCIAL CREDIT

BY THE SAME AUTHOR

Credit^ Power and Democracy. — With
a draft Scheme for the Mining In-
dustry. With a commentary on the
included scheme by A. R. Orage.
Second Kdition. Crown 8vo. 7s. 6d.
net.

** Major Douglas’s proposals^ outlined and ex-
planed in this volume, have for some months
occupied an important place among the various
plans put forward to counter the economic crisis
throu^ which the country is passing. It is indeed
posaime that before many months have passed we
may see them proposed. It would surely be a good
thing, therefore, in a country that prides itself upon
being a democraCv, that such ideas as these should
be canvassed publicly and some definite opinion
formed on them .*' — Tne Ximts.

Hconomic Democracy. — Crown 8vo.
6s. net.

Control and Distribution of Produc-
tion. — Crown Svo. 7s. 6d. net.

These Present Discontents and the
Labour Party. — Crown 8vo, is. net.

The Dougflas Theory. — Crown 8vo.,
sewed. 6d. net.

SOCIAL CREDIT

BY

Major C. H. DOUGLAS, M.Inst.Mech.E.

AUTHOR OP “credit POWER AND DEMOCRACV,’

“economic democracy,” ETC.

CECIL PALMER

FORTY-NINE
CHAN DOS
STREET
W.C. 2.

FIRST

EDITION

1924

COPY-

RIGHT

PRnrTBD IN OSSAT BRIXAIN BY J. ANB J. aRAT« BBINBUROH

PREFACE

There is an ancient saying (which will bear
consideration in these days of change and un-
rest) that the devil is God upside down. A
consideration of many of the injurious and
tyrannical practices which obtain support in
Great Britain and America under the cloak
of such words as Justice and Democracy, and
the object lesson provided by Kussia, and
possibly by Italy and Spain as the consequences
of their extension, may serve to emphasise the
necessity for clear thinking in this matter.

In the following pages an endeavour has been
made to indicate the general lines which, it
would appear, are essential in dealing not only
with the concrete problems, but the perverted
psychology which, in combination, threaten
civilisation.

C. H. DOUGLAS.

TBUPtB,

Janvary 1924.

CONTENTS

PAET I.

PHILOSOPHY.

TAOB

Chapter 1 1

Chapter II 13

Chapter III 25

Chapter IV 37

Chapter V 49

Chapter VI. ....... 69

Chapter VII 69

Chapter VIII. 77

PART II.

THE MECHANISM OF THE CLASSICAL
IDEAL.

Chapter 1 89

Chapter II 107

Chapter III 123

Chapter TV 136

Chapter V 147

Chaster VI 166

Chapter VII 177

vii

vm

CONTENTS

PAKT III.

THE DESIGN OF ECONOMIC FREEDOM.

Chapteb 1 187

Chapteb II 199

Chapteb hi. ....... 213

PART I.

PHILOSOPHY.

CHAPTER I.

B

CHAPTER I.

We have in England, probably to a
greater extent than elsewhere, two distinct
systems of education flourishing side by side.
The distinction is clearly marked in the
public schools and universities ; but it is
traceable through every grade of educational
institution by the arrangements which are
made to prepare candidates for public and
other examinations. These two systems in
the Public Schools are the Classical and
the Modem sides, and have their equivalent
Triposes and Honours Schools in the
universities.

Now, it does not seem to be so clearly
realised as it should be, that these two
systems of education are, considered separ-
ately, incompatible with each other. The
classical system is the embodiment of an
extraordinarily attractive and artistic ideal
or conception of the nature of society, and
the conditions under which society lives,
moves, and has its being. It is above,

2

SOCIAL CREDIT

outside, possibly in advance of, facts. The
modem school, of which inductive natural
science, based upon the experimental ascer-
tainment of fact, is the back-bone, has not
essentially anything to do with ideals at all.
It is realistic ; its first postulate is that forces
always act in a similar manner when placed
in a similar relation to each other. It refuses
to admit, as a fact, anythmg which cannot
be demonstrated, and as a theory, anything
which does not fit the facts. For example,
the classical ideal contends that men “ ought ”
to be good, brave and virtuous. The modem,
that it does not understand the meaning of
goodness, that bravery and virtue are not
capable of exact definition, and, that so far
as the word “ ought ” has any meaning, it
postulates the existence of a force so far un-
demonstrated.

It will be easily recognised on a moderate
consideration, that the effect on the everyday
world of these two philosophies cannot fail to
be dismptive. The logical outcome of the
classical ideal is to lay the emphasis of any
observed defects in the social organisation on

3

SOCIAL CKEDIT

defects in the characters of the persons com-
posing the society. Wars occur because people
are wicked, poverty, because people are idle,
crime because they are immoral. Material
progress which in its essence is applied Science,
is repulsive to the Classical mind, because it
does, in fact, stultify the rigid Classical ideal.
Converselv, the scientific attitude tends to the
opposite extreme, towards what is called
Determinism ; that people’s actions, thoughts,
and morals, are purely the outcome of more
or less blind forces to which they are subjected,
and in regard to which, both censure and
praise are equally out of place.

It is very probable that, as in many con-
troversies, there is a good deal to be said for
both points of view, but it is even more prob-
able that approximate truth lies in apprecia-
tion of the fact that neither conception is
useful without the other. It is probable
that in the less fortimately situated strata of
society, a theory of economic Determinism
would be a sound and accurate explanation
for the actions of 98 per cent, of the persons
to whom it might be applied ; that those

4

SOCIAL CREDIT

persons are, in fact, obliged to act and think
in accordance with limitations which are im-
posed upon them by their environment. In
short, that their environment is more powerful
in shaping them, than they are in shaping
their environment. But this is not true of
all of their more fortunate contemporaries.
There are, without a doubt, circumstances in
the world, in which the personal conceptions
of individuals can have powerful and far-
reaching consequences on their immediate and
even national or continental environment. It
seeros reasonable to believe that a Napoleon,
a Washington, or a Bismarck have, in efEect,
changed the course of history, just as it is
certain that a James Watt, a George Stephen-
son, or a Faraday, have altered the centre of
gravity of industrial and economic society.

All this is sufficiently obvious, but the
important idea to be drawn from it, is that
before, at any rate, human ideals (including
the Classical and religious ideals), can be
brought into any effective relationship with
and control by the great mass of the popula-
tion, that population must be released from

5

SOCIAL CREDIT

the undue pressure of economic forces. It
is quite arguable that Napoleon was a curse
to Europe, but it is not reasonably arguable
that a Napoleon, if living at this time, would
be sure to repeat the history of the late
eighteenth and early nineteenth centuries. It
is reasonably arguable also, that no man could
reproduce the career of Napoleon or Bismarck
in a country in which the majority of the
inhabitants were both economically inde-
pendent, and politically contented.

A clear understanding of the circumstances
in which personality is of importance in
effecting enmonment, and, on the other
hand, the circumstances in which it is un-
reasonable to expect the development of
personality which may be considered satis-
factory in a pragmatic sense, is of the first
importance to a balanced consideration of
the difficulties and dangers which beset the
civilised world at the present time, as well
as to the framing of any proposals to meet
the situation. No one, having devoted any
consideration to the subject, can fail to feel
exasperation at the exhortations of the con-

6

SOCIAL CREDIT

firmed sentimentalist forever clamouring after
a “change of heart.” What effect on his
particular difficulties is it going to have, if
the miner, abandoning self interest, goes to
his employer and offers to accept half his
present wages ? Or the mine-owner, faced
with a loss, who raises his men’s wages 1
What effect on the dividends of the shopkeeper
already in debt to his bank, and in doubt as
to the source from which he shall pay his next
week’s rent, and meet the difference on his
overdraft, does it have, if smitten with the
sudden desire to apply the golden rule to
business, he sells his goods at half their cost
to him, because he knows his clientele, who
are coal-miners, cannot afford more ; thus
accelerating his progress to the bankruptcy
court and the cessation of his activities as
a distributor ? What is the use of epileptic
addresses on the criminality of war, when
the enemies’ aeroplanes, if not stopped,
propose dropping poison gas bombs on a
population which has, probably, not the
faintest understanding of the casus hdli?

On the other hand, no one who has attempted
7

SOCIAL CREDIT

to obtain a hearing for concrete proposals of a
social nature from persons who seemed from
their position in the world to be favourably
situated in respect of their furtherance, can
fail to have realised that a difficulty is always
met with, in establishing a common point of
view ; that in fact, it is a condition of execu-
tive postion-holdmg, that the point of view
shall be in the highest degree, and in the
narrowest sense, conservative. It is not an
unfair description of the position to say that
those persons who in the main are anxious
for changes in the social structure are power-
less to efEect them, while persons more favour-
ably situated to bring them about, are rarely
very anxious to do so. There is not really
much difference in the “ heart ” of the two
descriptions of person ; the difference in
behaviour arises from the fact that one is
reasonably satisfied with his lot, the other
is not.

This is not an abstract problem, it is a prac-
tical problem of the first importance. It can
be stated in general terms as the problem of
bringing tc^ether of desire and the means of

8

SOCIAL CREDIT

fulfilment, in relation to the largest possible
number of individuals. At every step it is
complicated in the practical world by the
interjection of so-called moral issues. The
courageous bishop who stated that he would
rather see England free than sober, may, or
may not, have realised that he was postulating
in an attractive form, an issue which challenges
the idea that a good end can excuse a bad
means. Exactly the same issue is raised by the
endeavour, and very successful endeavour, to
exhibit “ unemployment ” as a symptom of
industrial break down, rather than, as it
should be, a sign of economic progress.

Closely interwoven with the classical and
moral theory of society, is the theory of
rewards and punishments. So familiar is this
idea, through education and experience, to
most people, that it is only with some diffi-
culty that they are brought to realise that it
is an artificial theory and not inherent in
the nature of things ; that the statement “ be
good and you will be happy ” does rely for
any truth it may possess on any fixed relation
between the abstract qualities of goodness and

9

SOCIAL CREDIT

happiness, but upon the fixed relation of cause
and effect between certain actions to which
the title “ goodness ” may arbitrarily be
applied, and their re-actions which we term
“ happiness.” This may appear to be word
splitting, but when we realise that the whole
of the industrial, legal, and social system of
the world rests for its sanctions on this theory
of rewards and punishments, it is difficult to
deny the importance of an exact comprehension
of it.

For instance, the industrial unrest which
is disrupting the world at the present time,
can be traced without difficulty to an in-
creasing dissatisfaction with the results of the
productive and distributing systems. Not
only do people want more goods and more
leisure, and less regimentation, but they are
increasingly convinced that it is not anything
inherent in the physical world which prevents
them from attaining their desires ; yet captains
of industry favourably situated for the
purpose of estimatiug the facts, are almost
unanimous in demanding a moral basis for
the claim put forward. That is to say, those

10

SOCIAL CREDIT

very persons whose activities at the present
time are chiefly concerned with restricting
the output of the economic machine to its
lowest limit, while yet asking each individual
to produce more, are determined that not even
the over-spill of production shall get into the
hands of a semi-indigent population, without
some equivalent of what is called work,
even though the work may still further
complicate the very problem with which these
industrial leaders are concerned. Nor is it
fair to say that this attitude is confined by
any means to the employing classes. Labour
leaders are eloquent on the subject, and with
reason. The theory of rewards and punish-
ments is the foundation stone of the Labour
leaders’ platform, just as it is of the employer
whom he claims to oppose. The only differ-
ence is m respect of the magnitude and award
of the prizes and as to the rules of the
competition for them. To any one who
will examine the subject carefully and dis-
passionately it must be abundantly evident that
Marxian Socialism is an extension to its logical
conclusion of the theoiy of modern business.

11

CITAI>TE3R II.

CHAPTER II.

The practical difference between the theory
of rewards and punishments, and the modem
scientific conception of cause and effect, can
be simply stated. The latter works auto-
matically, and the former does not. If I
place my bare finger upon a red hot bar, so
far as science is aware, I shall be burnt, whether
I am a saint or a pickpocket. That is the
Modernist view. It is not so many hundred
years ago since the Classical view held that
I should only be burnt if I were a pickpocket
or similar malefactor ; and ordeal by fire was
a ceremony conducted on this theory. It is
alleged in select circles even yet, that it is
possible to be so saintly, that fire loses its
power over the human flesh. But a manu-
facturer of rolled steel rails, who laid out his
factory on the assumption that it would be
possible to hire enough saints to handle his
white-hot product without apparatus other

14

SOCIAL CREDIT

than saintliness, would undoubtedly experience
labour troiible.

That is the point. It is not necessary to
have a contempt, or to be lacking in a proper
respect, for qualities in human beings which
add to the grace, dignity and meaning of
human existence, to be quite clear that those
qualities are not in themselves at issue in
regard to many of the economic and industrial
problems which confront the world at this
time.

No one would contend in so many words,
that the efficiency of the modern factory or
farm, considered as a producing mechanism,
is seriously handicapped by the lack of moral
qualities in those employed. It is a familiar
suggestion, brought forward for the consump-
tion of a mystified and uninformed public
that, e.g. “ Ca‘ Canny ” methods. Trade Union
rules, and idle workers, are responsible for
trade depression, but only sentimentalists and
middlemen out of touch with production, pay
very serious attention to the idea. Of course
such practices may seriously complicate the
general question, and their existence does

16

SOCIAL CREDIT

enable the real causes to be masked in a
babel of recrimination. At the present time,
however, there is not a manufacturer of any
consequence who would not feel himself
capable of obtaining almost any output
required of him, provided that all restrictions
of price and cost were removed ; or to put
the matter as shortly as possible, the
difficulties with which the modem employer is
confronted are not difficulties of production,
they are difficulties in respect to the terms of
the contract to which he himself, his employees
and the purchasing public are all parties.
If, therefore, a majority of persons so placed
that they are in a position to impose their
will on the remainder of the world, are
determined to run the whole producing system
of the world as a form of government, it is
certamly not yet proven that they cannot
do it. But it certainly is already clearly
proven that they cannot, at one and the same
time, make the producing and distributing
systems a vehicle for the government of
individuals by the imposition of rewards and
punishments, which involves arbitrary re^

16

SOCIAL CREDIT

strictions on the distribution of the product,
and at the same time be the most efficient
and frictionless machine for the production
and delivery of the maximum amount of
goods and services with the minimum ex-
penditure of time and labour on the part of
those concerned in the operation. That is
indisputable.

So far as this matter is ever discussed at
all, the argument is apt to proceed in a vicious
circle. In the face of the patent and growing
difficulty of finding employment in ordinary
economic avocations for those who at present
cannot live without it, it is claimed that the
introduction of any method by which the
unemployed could live, i.e. be “ rewarded ”
without being employed, besides being im-
moral, “ demoralises them,” i.e. renders them
unsuitable for subsequent employment. Dis-
regarding for the moment the circular nature
of this argument, it is curious to notice how
generally it is accepted in the face of a good
deal of evidence to the contrary, and very
little evidence in support of it. It is notorious
that some of the most successsful and useful

17 c

SOCIAL CREDIT

members of the commimity during the times
of stress between 1914 and 1919, were young
men and women of whom nothing but the
worst was prophesied during their idle years
which immediately preceded the war. It is
perfectly true, nevertheless, that it is difi&cult
to induce persons who have once enjoyed
the expanding influences of increased freedom
of initiative, to return to long hours of
mechanical drudgery, offering no prospect
of improvement or release, and it is not un-
fair to say that numbers of employers of a
somewhat narrow outlook have this fact at
the back of their minds when they bewail
to demoralising influences which have been
brought to bear upon their employees during
the last decade.

It is fairly evident then that, before any
solution to all these problems of world unrest
can be put forward with any certainty of
success, it is necessary to come to some
understanding on matters of fact.

The primary fact on which to be clear is
that we can produce at this moment, goods
and services at a rate very considerably

18

SOCIAL CREDIT

greater than the possible rate of consumption
of the world, and this production and delivery
of goods and services can, under favourable
circumstances, be achieved by the emjdoy-
ment of certainly not more than 26 per cent,
of the available labour, working let us say
seven hours a day. It is also a fact that
the introduction of a horse - power - hour of
energy into the productive process could,
under favourable circumstances, displace at
least 10 man-hours. It is a fact that the
amount of mechanical energy available for
productive purposes is only a small fraction
of what it could be. It seems, therefore, an
unassailable deduction from these facts that
for a given programme of production, the
amount of man-hours required could be
rapidly decreased, or conversely, the pro-
gramme could be increased with the same
man-hours of work, or any desired combina-
tion of these two could be arranged. But
it is also a fact that, for a given programme,
increased production per man-hour means
decreased employment. It is also a fact,
that never during the past few decades

19

SOCIAL CREDIT

have we been free from an unemploy-
ment problem, and it is also a fact Idiat never
during the past 60 years has any industrial
country been able to buy its own production
with the wages, salaries, and dividends avail-
able for that purpose, and m consequence,
all industrial coimtries have been forced to
find export markets for their goods.

So that we are confronted with what seems
to be a perfectly definite alternative. We
Can say, as we are saying up to the present
time, that the wages, salaries, and dividends
system, with its corollaries of the employment
system, as at present imderstood, and the
moral discipline which is interwoven with all
those things, is our prime objective. Having
decided that, we have decided that the in-
dustrial system with its banks, factories, and
transportation systems, exists for a moral end,
and does not exist for the reason which induces
individuals to co-operate in it, i.e. their need
for goods ; and that moral end can only be
achieved through the agency of the system
and its prime constituent — employment. And
the practicd policy to be pursued is one which

20

SOCIAL CREDIT

♦

has been frequently pointed out from very
diverse sources, and which was the basis, or
alleged basis, of the Russian Revolution. It
is to make the man-hours necessary for a
given programme of production equal to the
man-hours of the whole population of the
world, so that every one capable of any sort of
work should, by some powerful organisation,
be set working for eight or any other suitable
number of hours a day. To achieve this end,
the use of labour-saving machinery should
be discouraged, all scientific effort should
be removed from industry (as was done in
Russia), and, in particular, modern tools,
processes, and the application to industry of
solar energy in its various forms should be
vigorously suppressed. Failing an alternative,
one should dig holes and fill them up again.
All this is the logical outcome of the attitude,
not merely <St the orthodox employer (although
he may not realise it), but of the orthodox
socialist, and it ought to be clearly recognised.
The world has not yet passed a deliberate
verdict on the matter, and it ought to have
the case and the evidence ; and in the mean-

21

SOCIAL CREDIT

time the atmosphere of war and economic
catastrophe in which the world is enveloped,
should be accepted as a desirable means
towards a high moral objective.

The other alternative, while recognising the
necessity for discipline in the world, does not
concern itself with that necessity in con-
sidering the modem productive process. It
surveys the facts, finds an inherent incom-
patibility between the substitution of solar
energy for human energy, and the retention
of a financial and industrial system based on
the assumption that work is the only claim
to goods, and takes as its objective the delivery
of goods, making the objective always sub-
ordinate to human individuality. It is not
concerned at all with abstractions such as
justice. It has no comment to make on the
fact that one man does twice as much work
as another, except to enquire whether he likes
doing it; or that one man wants twice as
much goods as another, except to investi-
gate the difficulties, if any, in giving them to
him. It observes, or thinks it observes, that
it has sufficient data to predict not only that

22

SOCIAL CREDIT

such a policy would work, but that it is the
only policy in sight which would work.

The vast majority of discussions which take
place in regard to industrial problems are
prevented from arriving at any conclusion
from the fact that the disputants do not
realise the premises on which their arguments
are based, and in many cases use words (and
“ justice ” is a very fine example of such words)
which beg the whole question at issue. It is
not too much to say that one of the root
ideas through which Christianity comes into
conflict with the conceptions of the Old
Testament and the ideals of the pre-Christian
era, is in respect of this dethronement of
abstractionism. That is the issue which is
posed by the Doctrine of the Incarnation.

23

III.

CHAPTEE III.

We live so close to a world shot through with
the theory of rewards and punishments that
the relation between the system and its results
is very apt to escape us. We are told for
instance, with all the weighty emphasis which
can be given to the assertion by the prestige
of names much in the public eye, that our
present distress arises simply because we are
a poor nation as the result of a great war.
The idea inherent in this is that war is wicked,
poverty is painful, and wicked people who
went to war ought to endure pain, and, there-
fore, we ought to be poor. And because of
this logical morality the idea is accepted almost
unquestioningly by millions of people who
only have to use their eyes to see the patent
absurdity of it. Is there a manufacturer in
this country, or for that matter in any other,
who is not clamouring to turn out more goods

26

SOCIAL CREDIT

if someone will give him orders for them ?
Is there a farmer who is complaining that his
land and his stock are unable to cope with the
demands for agricultural produce which pour
in upon him ? If so, an explanation as to
why nearly two milli on acres of good arable
land have gone back to pasture in the last
two or three years would be interesting.

On the other hand, it is equally patent that
in spite of this enormous actual and potential
reservoir of the goods for which mankind has
a use, a large proportion of the population is
unable to get at them. What is it, then, which
stands in between this enormous reservoir of
supply and the increasing clamour of the
multitudes, able to voice, but unable to
satisfy their demand 1 The answer is so
short as to be almost banal. It is Money.
And as we shall see, the position into which
money and the methods by which it is con-
trolled and manipulated have brought the
world, arise not from any defect or vice
inherent in money (which is probably one of
the most marvellous and perfect agencies
for enabling co-operation, that the world

27

SOCIAL CREDIT

has ever conceived), but because of the
subordination of this powerful tool to the
objective of what it is not unfair to call a
hidden government.

Now it is impossible to conceive (in spite
of a good deal of cynicism to the contrary)
of a government which has not a policy,
although that policy may be far from
apparent. The very conception of govern-
ment postulates that certain lines of action
and conduct shall be inhibited, and that the
persons governed shall be allowed to proceed
only in some pre-determined direction. In
other words, government is limitation, and
from the nature of the limitations it is possible
to determine the policy of the organisation
imposing the limitations. For instance, while
it is true enough to say that extensive military
preparations do not necessarily mean war, the
qualification implied in this statement is that
the main threat which such preparations con-
stitute wiQ be sufficient to achieve the desired
result without the actual use of military force.
The military preparations impose a limit on
action in certain directions, and then become

28

SOCIAL CREDIT

indications and very often very valuable
indications of the policy of nations.

Similarly, if we consider dispassionately the
situation to which reference has just been
made (a world which is either actually or
potentially overflowing with material riches,
and, at the same time, a population which
is prevented from obtaining them by a set of
rules supported by every possible device that
legal organisation can devise), we can say that
we are in the presence of an effective and
active government, irrespective of the source
of that government ; and that government
must have a policy. For our immediate
purpose, it is nearly irrelevant whether that
policy is a conscious policy, in the sense of
having been put into a clear and logical form
by some body of men, however small, or
whether it is unconscious in the sense that
it is the outcome of something we call human
nature. The important matter is to get a
clear conception of what the policy is as a
first step to supporting or opposing it, if it
is agreed that we have any measure of self-
government, or ought to have any.

29

SOCIAL CREDIT

One of the first facts to be observed as part
of the social ideal which leans for its sanctions
on rewards and punishments, is the elevation
of the group ideal and the minimising of
individuality, i.e. the treatment of individu-
ality as subordinate to, e.g. nationality. The
manifestations of this idea are almost endless.
We have the national idea, the class or
international idea, the identification of the
individual with the race, the school, the
regiment, the profession, and so forth. There
is probably no more subtle and elusive subject
than the consideration of the exact relation
of the group in all these and countless other
forms, to the individuals who compose the
groups. But as far as it is possible to sum
the matter up, the general problem seems to
be involved in a decision as to whether the
individual should be sacrificed to the group or
whether the fruits of group activity should be
always at the disposal of the individual. If we
consider this problem in connection with the
industrial and economic situation, it is quite
incontestable that every condition tending
to subordinate the individual to the group is,

30

SOCIAL CEEDIT

at the moment, fostered. Institutions which
wotild appear to have nothing in common and
to be, in fact, violently opposed, can be seen
on closer investigation to have this idea in
common, and to that extent to have no
fundamental antagonism. Pre-war Germany
was always exhibited as being reactionary,
feudal, and militaristic to an extent unequalled
by any other great power. Post-war Russia
is supposed by large masses of discontented
workers, to be the antithesis of all this. But
the similarity of the two is daily becoming
more apparent and it is notorious that the
leaders of pre-war Germany are flocking to
post-war Russia in increasing numbers, in the
lively hope of the fulfilment of the ideals
which were frustrated by the Great War.
The latest pronouncements on industrial affairs
by Russian Statesmen are indistinguishable
from those of American, German, or British
bankers (which statement is not intended as
undiluted praise). It is significant that the
arguments voiced from all of these quarters
are invariably appeals to mob psychology —
“ Europe must be saved,” “ Workers of the

31

SOCIAL CREDIT

World unite,” etc. The appeal is away
from the conscious-reasoning individual, to
the unconscious herd instinct. And the
“ interests ” to be saved, require mobs, not
individuals.

No consideration of this subject would be
complete without recognisiag the bearing upon
it of what is known as the Jewish Question ;
a question rendered doubly difficult by the
conspiracy of silence which surrounds it.
At the moment it can only be pointed out
that the theory of rewards and punishments
is Mosaic in origin ; that finance and law
derive their main inspiration from the same
source, and that countries such as pre-war
Germany and post-war Russia, which exhibit
the logical consequences of unchecked collec-
tivism, have done so under the direct influence
of Jewish Leaders. Of the Jews themselves,
it may be said that they exhibit the race
consciousness idea to an extent unapproached
elsewhere, and it is fair to say that their
success in many walks of life is primarily
due to their adaptation to an environment
which has been moulded in conformity with

32

SOCIAL CREDIT

their own ideal. That is as far as it seems
useful to go, and there may be a great deal
to be said on the other side. It has not yet,
I think, been said in such a way as to dispose
of the suggestion, which need not necessarily
be an offensive suggestion, that the Jews are
the protagonists of collectivism in all its
forms, whether it is camouflaged under the
name of Socialism, Fabianism, or “big busi-
ness,” and that the opponents of collectivism
must look to the Jews for an answer to the
indictment of the theory itself. It should in
any case be emphasised that it is the Jews
as a group, and not as individuals, who are
on trial, and that the remedy, if one is
required, is to break up the group activity.

The shifting of emphasis from the
individual to the group, which is involved
in collectivism, logically involves a shifting of
responsibility for action. This can be made,
it would appear, an interesting test of the
validity of the theory. For instance, the
individual killing of one man by another we
term murder. But collective and wholesale
killing, we dignify by the name of war, and

83 D

SOCIAL CREDIT

we specifically absolve the individual from the
consequences of any acts which are com-
mitted under the orders of a superior officer.
This appears to work admirably so long as
the results of the action do not take place
on a plane on which they can be observed ;
but immediately they do, the theory
obviously breaks down. There may be, ex-
hypothesi, no moral guilt attributable to the
individual who goes to war; but the effect
of interceptmg the line of flight of a high-
speed bullet will be found to be exactly the
same whether it is fired by a national or a
private opponent. Nations are alleged to
have waged the first world war, but the
easualities both of life and property fell upon
individuals. There is no such thing as an
effective national responsibility — ^it is a pure
abstraction, under cover of which, oppression
and tyranny to individuals, which would not
be tolerated if inflicted by a personal ruler,
escape effective criticism.

We do not know what is the automatic
reaction consequent on the killing of one
individual by another, as distinct &om the

34

SOCIAL CREDIT

non-automatic and artificial reaction involved
in the trial and punishment of a murderer in
a court of law. But we do know that over
every plane of action with which we are
acquainted, action and reaction are equal,
opposite, and wholly automatic. Conse-
quently, there is nothing to indicate that the
automatic consequences of a given action will
exhibit any difference if committed under the
orders of a superior officer, or not. Further,
it may be observed that non-automatic
“ punishment ” really constitutes a separate
group of actions and reactions.

If we throw a stone into a still pool of water,
the ripples which result are not eliminated
by throwing in a second stone, although they
may be masked, and to the extent that legal
punishments represent, not the ripples from the
first stone, but the casting of the second, it
will be seen that a very complicated situation
is inevitable.

36

CHA-I^XER

IV.

CHAPTER IV.

The consequences of the exaltation of the
group over the individual have often been
pointed out in various forms of words, as
well as having been demonstrated sufficiently
in such countries as Russia and Germany,
but it would be unduly optimistic to say that
they are generally recognised or understood.
And the reason for this is not far to seek.
It is possible so to twist the meaning of words,
that policies which result in conditions which
are progressively obnoxious to the majority
of persons affected by them, can yet obtain
a considerable amount of support, by an
appeal to high-sounding words such as demo-
cracy, justice, and equality. The emotion to
which appeal is made, is exactly that which
was invoked to justify witch-burning. The
point which is so hard to make clear to the
masses affected, is that a group is an entify

38

SOCIAL CREDIT

which has a life of its own ; it is the body
corporate of an “ interest,” not of the myriad
interests of the human units composing it, and
the surrender of volition to a group means,
quite inevitably, a surrender of the very
things for which in most instances the in-
dividual is struggling. Yet this body cannot
be kicked, nor can the group-soul be saved,
save in the persons of the individuals who
lend themselves to its purposes. Even the
leaders of a group are only leaders so long as
they serve the interests of the group, and to
that extent are as much slaves of it, as the
humblest member of the rank and file ; a
fact which it is well to bear in mind when
attributing to captains of industry qualities
which belong rather to their office than to the
individuals themselves. It is of course true
that “ head ” or supervising slaves are
generally strong supporters of slavery as
an institution.

And yet it is patent that the modem world
can only be operated through a liberal use
of the group idea. If we are to have great
co-operative undertakings, by which alone,

39

SOCIAL CREDIT

so far as we are aware, mankind can be freed
from the necessity of devoting the major
portion of his day to the acquisition of
sufficient food, clothing, and shelter from the
weather, there must be a submission by those
concerned in such enterprises to a given policy,
for instance, of production. This is, of course,
common sense, and a matter of common
observation, and to the extent that there is
a legitimate relation between the group
interest thus formed, and the personal
interests, is sound in every way. But there
are two qualifications which can be made
in respect of this submission. The first of
these is, in plain English, very largely bound
up with the length of time per day or per
year during which the submission is
necessary, and it has already been observed
that the free play of modem science and
organisation would, under certain circum-
stances, tend to reduce this to a very small
minimum within a very short time. The
second qualification is involved in the phrase
“freedom of association.”

At the present time such a thing can hardly
40

SOCIAL CREDIT

be said to exist outside the realms of sport.
If I join a cricket club and find that I do not
like the game, or the methods governing the
conduct of the club itself, I am usually free
to resign without further penalty than attaches
to the loss of association, and the consequent
fsMsilities for playing cricket. But if I enter
a profession or business and find that I do
not like it, or the methods under which it is
conducted, it is true that I am free to resign,
but the penalty attached to resignation greatly
exceeds the mere deprivation of association
and the facUities to exercise the profession
or business — it includes economic catastrophe
for myself and my family. In other words,
I come up against the doctrine of rewards
and punishments in an acute form, since it
is absurd to suggest that if I resign, the necess-
ary work previously done by me will remain
undone. It will not, if it is tolerable work
and done under tolerable conditions. An
average consequence is that I do not either
resign from, or criticise actively, my associa-
tions of this nature. In passing, it may be
noticed that only very recently has the

41

SOCIAL CREDIT

absurdity of the “ right to strike,” as exercised
under current financial methods, dawned upon
the labour party and its constituents. Where
one party to a controversy can only obtain
the means of subsistence by “ working ” while
the other party can continue, if not in-
definitely, for a very long time, by drawing
cheques on institutions which, if necessary,
can create their own deposits, the right to
refrain from working merely amounts to a
right to commit suicide. The decline of the
practice of Hari-Kari in Japan, as a means
of inflicting injury on an adversary, would
tend to show that suicide is losing its terrors
for the onlooker.

There is probably more nonsense spoken
and written around the words freedom and
liberty, than in regard to any other two
words in the English language. As a result
of this, we have quite recently been treated
to a dissertation by Signor Mussolini, suggesting
tbat liberty is an outworn and discredited
word. Signor Mussolini is mistaken. Liberty
will come into its own, although it is quite
possible that two groups which are deadly

42

SOCIAL CKEDIT

enemies of it and have much in common,
including very probably, a similar origin, t.e.
Bolshevism and Fascism, may be necessary
to clear the minds of the public of much of
the misconception which surrounds the idea,
by demonstrating what it is not.

Liberty is really a simple thing, although
difficult to come by. It consists in freedom
to choose or refuse one thing at a time. It
is undeniable that every action has con-
sequences. But by no means all the
consequences of actions, as committed in
everyday life, are necessary consequences. If
I drive a motor car at forty miles an hour on
an open road, it is an artificial consequence
that I am fined for exceeding the speed limit,
though a natural consequence that I arrive
at my destination quicker than if I drove at
twenty miles an hour. If I pick up a red hot
bar, it is not necessary that I should be burnt.
I can wear asbestos gloves. It is the hedging
round of actions with conditions or “ Laws ”
of various descriptions so as to produce an
artificial or undesired train of consequences,
which constitutes an infringement of liberty,

43

SOCIAL CREDIT

and in a very large number of cases, just as
it is the Law which makes the Crime, it is
stupidity which conceives the law.

If I say that, being a golfer, I wish to play
golf all day, seven days a week, I am in efiect
demanding freedom from certain limitations
which are normally imposed on me, such as
the earning of a living, not to mention other
social duties. Now the abstract criticism
which is nearly always urged in connection
with a hypothetical case of this sort is, that
if everyone played golf all day seven days
a week, the world would come to a standstill
for want of the necessaries of life. But this
line of approach is both fallacious and useless.
The useful line of approach is to consider how
many people if free to do it, want to do this
thing to this extent, and what effect that
number would have on the production pro-
granune. And the possibility of an increase in
the real liberty of the subject depends not
(as is so unceasingly proclaimed by the up-
holders of things as they are) in a continual
compromise between individual rights, but in
a continual attempt to r^ove limitations

44

SOCIAL CREDIT

which are non-automatic, that is to say, do
not proceed from what we call the laws of
nature. It must be confessed that a con-
sideration of our machinery for putting regu-
lations on the statute book, does not lead to
any great optimism at the moment in this
regard.

It is in the method of attack on its problems,
that modem inductive science offers such a
striking lesson to politics and legislation ;
in recognising the existence of certain forces
in the universe which have real validity, and
that in consequence its triumphs must be
achieved by ascertaining the nature of these
forces and, taking them as they are, employing
and combining them to achieve the desired
result. But the whole of our modem civilisa-
tion is hedged in, distorted, and confused by
a ntunber of limitations which have no
validity other than that which we choose to
give them. Let anyone who may doubt this
statement, and its profoimd significance, take
up a daily paper and consider the suggestions
of correspondents and leader writers in regard
to any situation which may at the moment

46

SOCIAL CREDIT

be engaging attention. Has there been a
motor accident ? Then a new law must be
passed imposing fresh restrictions on the use
of motor cars. Has there been a strike in
the East End ? Laws should be passed to
make striking illegal. The joint phenomena
of several milli ons of unemployed and under-
employed, capable of road building, and willing
to work, and the fact that 95 per cent, of the
motor car accidents which occur are traceable
to avoidable congestion of traffic and out-
of-date roads, is apt to be the very last thing
which is pointed out in relation to the first-
mentioned problem ; and the fact that the
actual amount of goods which would be bought
by the extra money necessary to keep the
East End strikers at work, is trivial in com-
parison with the quantity available, is never
even mentioned in regard to the second.

It should not be, but probably is, necessary,
at this point, to observe that it would be
fantastic and impracticable to destroy the
whole fabric of legalism at one blow. There
is a great deal of work to be done in deciding
the nature and relation of physical and psycho-

46

SOCIAL CREDIT

logical limitations before anything so drastic
is possible. But it is possible to recognise
and to work towards the objective ; and,
moreover, it is urgent. Especially in America,
Legalism is becoming an obsession. Yet non-
automatic laws rest upon a very insecure
foundation. When we see, as we do, statements
in leading European and American journals
to the effect that civilisation is tottering, it
may be inferred without much difficulty that
it is this fabric of non-automatic rules and
regulations which seems to the writers to be
in danger. The laws which govern the com-
bination of oxygen and hydrogen, or the rate
of acceleration of a stone dropped over a cliff,
are never seriously endangered by any of the
events to which so much importance is attached
in Wall Street and Lombard Street.

This being so, the picture presented to the
mind of any thoughtful observer must be that
of a bridge which has been reared through the
agency of scaffolding and false-work. Its
completion has been delayed and its lines
obscured by the failure to remove the struc-
ture which has enabled it to be built, but
47

SOCIAL CREDIT

which is no longer necessary. The people of
the world are clamouring for admission and
many of them are supported by the false-
work, The problem is to get the false-work
away without precipitating into a catastrophe
the swarming multitudes who regard it as the
real structure. Unfortunately, a number of
the foremen working on the bridge seem
themselves unable or vmwilling to distinguish
the structure from the scafiolding.

48

CHAPTER V.

B

CHAPTER V.

A CONCEPTION which is very closely connected
with the theory of rewards and punishments,
is that of “ Value.” In effect, value may be
defined, to fit the orthodox conception of it,
as that quality which gives to anything
maximum exchangeability under present con-
ditions. Rewards and Punishments, Justice,
i.e. the assessments of deserts, and “ Value,”
i.e. the basis on which deserts are assessed,
may be said to be the comer stones of the
Semitic structure of society.

Now, so far as this attribute called “ value ”
can be said to have any basis in the nature of
things, it consists in that quality which renders
a given object serviceable in the attainment
of a given end. But it will be found on con-
sideration that this definition is eventually
antagonistic to the more orthodox description
of the quality previously given. For instance,

60

SOCIAL OEEDIT

if it is necessary for me to cross a large river,
a boat would seem to be my immediate
requirement. Its utilitarian value to me
consists in its ability to transport me across
the river with a minim um of mconvenience
and a maximum of speed. But the generally
accepted opinion of its value would be directly
proportional to my ability or the ability of
someone else, to submit to penalisation
financially for the use of the boat, and this
again would be directly proportional to the
urgency of my need and would be enhanced
by the absence of other boats. It should be
particularly noticed that this kind of value
is not inherent — it is one remove away from
the simple usefulness of the boat.

As a result of this conflict of ideas and
consequently of objectives, the value of any-
thing which has a use is, according to the
popular idea, enhanced by its scarcity, and
it is quite fair and unimpeachably logical that
a world which seeks after “ values ” should
proceed to create them through the agency
of scarcity.

It is not only logical, but what is very
61

SOCIAL CREDIT

much more important, it is what happens.
The process of creating “ Values ” by creating
a demand which is excess of the supply, is
called advertisement, and by restricting a
supply so that it is always less than the demand,
is technically known as Sabotage. Advertise-
ment has its exposition on every hoarding;
Sabotage is its commercial complement, and
is one of the most wide-spread features of
our existing civilisation, and yet one which
on the whole passes unnoticed, in anything
like its true proportions, by the general public.
It is not confined to any one class of business
or profession, although its cruder manifesta-
tions, as might be expected, are foimd amongst
the less fortunately placed masses of the
people. It is, of course, the only theory, if
it can be so called, underlying the strike, the
assumption being that if the whole of the
available labour can be taken ofit the market
the financial value of it immediately increases.
The higher manifestations of it are slightly
more subtle but identical in principle. The
modem objective of big business is to obtain
the maximum amount of money lor the

62

SOCIAL CREDIT

minimum amount of goods. Or to put it
more accurately, to obtain a maximum total
price for a minim um total cost. As a result
of this, business acumen is measured by the
ability to create price rings in indispensable
goods, while decreasing the purchasing power
or “costs,” distributed during their manu-
facture and storage.

The theory underlying both advertisement
and Sabotage, together with their results,
has been treated at some length elsewhere.*
An important aspect of the latter, however,
which will perhaps bear explanation at this
time, is concerned with the financial policy
of nations.

When we say that the objective of modem
business is to obtain a maximum total price
for a minimum total cost, we are implying
in the case of a given undertaking that the
receipts shall be at least equal to the disburse-
m^ts, and in addition that the surplus of
receipts shall be as large as possible. This
is the same thing as saying that all the costs
of an article shall be included in the price of

* Economic Democracy.

58

SOCIAL CREDIT

it to the public. In the case of a nation, as
at present situated, all the alleged services
which it renders to the public composing it
are supposed to be paid for eventually
by taxes and the objective of every orthodox
government is to balance its budget, and to
repay its “borrowings.” That is to say, to
make its receipts in taxation equal or exceed
its expenditure, and in addition to have as
large a surplus as possible with which to pay
the interest on loans created by the financial
hierarchy and to “ sustain the nation’s credit ”
in view of future loans.

When, later, we come to examine the
mechanism of money and the sources from
which it originates, it will be seen that this is
not in any fimdamental sense necessary, but
for the moment it is only requisite to point
out that the result is to create a shortage of
money in the hands of the general public, and
in consequence to enhance its scarcity value.
If we can conceive, what is in fact the case
under the existing financial system, that money
is a commodity in exactly the same sense as
is tea or sugar, and that there is a powerful,

54

SOCIAL CREDIT

if unobtrusive business ring which deals in
money as a commodity, it will be readily
understood that the balancing of budgets
and the repayment of loans by taxation is
a prime interest of those interested in the
commodity. Money dealers are normally
deflationists.

And as no government can carry on for a
month without money, it is not necessary to
labour the point that the visible government
of a country is obliged to take its orders and
to shape its policy, and particularly its
financial policy, in accordance with the in-
structions of the dealers in this indispens-
able implement, so long as they hold a
practical monopoly of it.

Just as the artificial theory of rewards and
punishments is a distorted reflection of the
automatic process of cause and efiect, and the
orthodox idea of value has possibly its root
in something which may be described as
suitability, so, that questionable abstraction
to which we refer imder the name of justice
may have a ground work in the nature of things.
One instance of this, and an instance having

55

SOCIAL CREDIT

immense importance at the present time, is
contained in the theory of “ cultural heritage.”

The early Victorian political economists
agreed in ascribing all “ values ” to three
essentials : land, labour, and capital. With-
out staying at the moment to discuss the
unsatisfactory meanings which were fre-
quently attached to these words, we may
notice that, the three together being defined
as the soittce of all wealth, the possession of
one or the other of them seemed logically
defensible as a claim, and collectively, the
only valid claim to the wealth produced.
But it is rapidly receiving recognition that,
while there might be a rough truth in this
argument during the centuries prior to the
industrial revolution consequent on the in-
ventive period following the Renaissance, and
culminating in the steam engine, the spinning-
jeimy, and so forth, there is now a fourth
factor in wealth production, the multiplying
power of which far exceeds that of the other
tiuree, and which may be expressed in the
words of Mr Thorstein Veblen as the “pro-
gress of the industrial arts.” Quite cleariy,
66

SOCIAL CREDIT

no one person can be said to have a monopoly
share in this ; it is the legacy of cotmtless
numbers of men and women, many of whose
names are forgotten and the majority of whom
are dead. And since it is a cultural legacy,
it seems difficult to deny that the general
community, as a whole, and not by any
qualification of land, labour, or capital, are
the proper legatees. But if the ownership of
wealth produced vests in the owners of the
factors contributed to its production, and the
owners of the legacy of the industrial arts
are the general conmumity, it seems equally
difficult to deny that the chief owners, and
rightful beneficiaries of the modem pro-
ductive system, can be shown to be the
individuals composing the community, as
such.

Now it is indisputable that a solution of
the more immediately pressing problems with
which civilisation is confronted at the present
time, does in fact turn on the removal of the
limitations to the distribution of wealth (which
limitations also re-act on its production). So
that in this case, and no doubt in many others,

67

SOCIAL CREDIT

it is possible to make out a theoretical case
for a line of action which is also justifiable by
expediency. But the great danger of placing
too much reliance on the deductive method,
is that the whole of its conclusions are rendered
misleading and dangerous if an essential factor
is omitted from the premises.

68

CH-AJPXER

VI.

CHAPTER VI.

In dealing with the subject of Values in its
human aspect, many points of very practical
importance arise. One of these can probably
best be seen in correct perspective, by an
examination of common human motives. It
is involved in the complaint against the
modem co-operative industrial system, that
its routine operations are soul killing, mono-
tonous, and without interest, and that a
remedy can be found, and can only be found
in a return to handicraft.

A good deal of the criticism which has
proceeded from “ Intellectuals,” concerned,
and rightly concerned, with the desperate
defects of contemporary society, has been
directed to stress this point. It is an aspect
of modem industrialism which lends itself
to picturesque treatment and sentimentalism,
and probably the exploitation of it offers

60

SOCIAL CREDIT

more emotional reward to the would-be
reformer, and obtains wider acquiescence from
his public than is the case with the more
mechanical aspects of the same problem.

While it may be necessary, for these and
other reasons, to suspect over-emphasis, there
are solid groimds for thg complaint, and it
is well worth examination.

In so doing, we may employ a conception
which will be familiar to students of Eastern
Philosophy, which regards the world, or
society, as a macrocosm or “ Great Man,”
reflecting on a gigantic scale the microcosm
or individual man. In this conception every
attribute of the human individual is repeated
on a mighty scale in the “ World Man,” and,
to this World Man, the “ Prince of this
World,” the human individual bears very
much the same relation that the blood
corpuscle of the individual does to the human
body. It is no part of the purpose of this
book to offer any opinion as to the extent
to which this conception has any basis in
absolute truth, but it is undeniable that it
does form a very convenient basis in

61

SOCIAL CREDIT

estimating the probable success of any
suggested set of human relationships.

Now the interest of the blood corpuscle,
if it can be imagined to have an interest,
is only concerned with the body of which
it is a constituent in so far as the continued
existence of that body tends towards its own
progressive evolution, and the interest of the
human individual in society is similar. Any
other conception, besides being Pharisaical
and sentimental, is an invitation to all those
influences which stand ready to exploit the
individual under cover of such phrases as
Public Interest and National Duty. But it
is equally true, so far as we can see, that the
expansion of the human unit is dependent
upon the progress of society. That is to
say, upon environment. Virtue may flourish
in the gutter, but if Virtue can only flourish
in the gutter, as some people would have us
believe, then it is time that the nature of
Virtue received severe scrutiny. If these
relationships be admitted, at any rate for
the purpose of a working hypothesis, it seems
to follow that the human individual has two
62

SOCIAL CREDIT

aspects, one of which is functional, and
specialised, and is only concerned with the
health and well-being of the “ Great Man,”
i.e. Society, of which he forms a part. Out
of this aspect, he benefits indirectly, not

directly. This is exactly the position of the

individual in regard to the division of labour
which forms the basis of co-operative
industrialism. To proceed with our chosen
analogy, the individual can, in the nature
of things, only form a constituent of one

function of the Great Man, at any one instant
of time. There is nothing to prevent his

forming a constituent of another function at
a subsequent period of time. There seems
to be nothing inherently absurd in a man
being a bricklayer in the morning, and a
Company Director in the afternoon, and, in
fact, there are good grounds for imagining
that something of this sort may very possibly
come to pass. But the point it is desired to
stress at the present moment, is that, in this
aspect, the individual is not serving his
individuality, but ought to be serving his
environment in the best way possible, and

63

SOCIAL CREDIT

direct artistic gratification from work per-
formed in this way is neither specifically to
be looked for, nor is it the immediate object
of the work. It may even be the cause of
a narrow outlook.

Whether society as a whole can be imagined
to have an individuality of its own or not,
it may be repeated that Society’s individuality
is not a prime interest of the human individual.
It is an auxiliary interest, and may even be
a perversive interest. It is most probably
true that there can be no divergence between
true Public Interest and any true private
interest ; if it were so, words would have
lost their meaning ; but it is certain that no
crushing of individuality by Society can ever
conduce to the well-being of other individuals.
The human individual, under the same con-
ception, contains either in a latent or active
form, every function and attribute, although
on a minute scale, which can be imagined
to reside in a world society. Consequently,
although work for its own sake, or employ-
ment as an end and not a means, is objection-
able when it is purely functional, or to put
64

SOCIAL CREDIT

the matter in everyday terms, since it is
plainly desirable to cut down the amount
of time necessary to improve the general
environment at whatever rate is deemed
desirable, work for its own sake may quite
easily be essential to the well-being of the
individual. The difierence is subtle, but it
is very vital. To knit a jumper or to dig
and plough because of the satisfaction of
knitting a jumper or of creating a garden
or a wheatfield, or even because it is healthy,
is one thing, and it may happen as a bye-
product that the jumper or the wheatfield
will be superlatively well done ; to knit
jumpers, or to dig and plough 10 hours a
day, 6 days a week, 62 weeks a year, because
unless this is done the mere necessities of
existence cannot be obtained, is quite
another. To dress neatly, comfortably, and
suitably, taking half an hour over the process
seems reasonable ; to spend the day in
dressing is monomania — our forebears called
it “possession.” When we do things under
the compulsion of Society, we are blood-
corpuscles, not individuals ; we are doing
66 F

SOCIAL CREDIT

them in the interests of Society primarily,
and only secondarily, if at all, in the interests
of our own individuality. As society is at
present constituted, it is quite definitely to
its advantage, and tends to the perpetuation
of the present form of Society, that Lancashire
mill operatives should work the maximum
number of hours at a very dull occupation,
with the minimum of change of work, and
if individuals had no interests as such, that
is to say, if they were Robots, contemporary
society would probably work very well, and
no difficulties would arise. But Lancashire
mill operatives are developing individualities,
and their interests are quite clearly not the
same as those of Society as at present con-
structed, In one way or another the various
units which compose the Society are pro-
claiming unmistakably their objection to a
purely passive role, and the conflict which
we see proceeding all over the world at the
present time will clearly determine whether
Society has power to re-mould the individual
BO that he becomes piuely a passive agent
in respect of purposes which he cannot imder-

66

SOCIAL CREDIT

stand, and has no means of estimating, or,
on the other hand, whether the individual
by non-co-operation or otherwise, can break
up or re-mould Society. For my own part
I have small doubt as to the outcome.

67

OHjVJPTER

VII

CHAPTEB VII.

Out of the two conceptions of abstract
justice and abstract value, arises an important
misdirection of thought in connection with a
subject with which we shall become more and
more concerned as we proceed ; the subject
of Money, There are very few people who
would claim that the money systems of the
world are perfect, and the number of such
persons is decreasing daily. But when asked
to define the various defects in the money
system, it is quite remarkable to notice with
what monotonous regularity these ideas of
“ justice ” and “ value ” are paraded. It is
claimed that money is defective because it is
not an accurate measure of value, or that it
results in an unjust “ reward ” for labour, but
when such critics are asked to suggest a
method by which the relative value of a sunset,

70

SOCIAJ. CREDIT

and say, the Venus di Milo might be assessed,
on the one hand, or, on the other hand, what
is the “just” return for a given amount or
variety of labour, their answers are not usually
very helpful from a practical point of view.
Reams of paper and many valuable years
have been expended in endeavouring to define
and standardise this thing called “ Value,”
and with it, the methods of relating goods
and services to the standard when obtained.
The line of thought which is usually followed,
is something after this fashion.

“ Money is a standard or measure of value.
The first requisite of a standard or measure
is that it shall be invariable. The money
system is not giving satisfaction, money is not
invariable, therefore, the problem is to
standardise the unit of money.” As a con-
sequence of this line of argument, a dazed
world is confronted with proposals for com-
pensated dollars varying from time to time
in the amoimt of gold they contain in
accordance with the price index, or even with
card money out of which holes are punched
to represent its adjustment to the physical

71

SOCIAL CKEDIT

realities of economics. Nor is the mis-direction
of thought confined to professional economists.
Almost the first idea which seems to present
itself to physical scientists whose attention
is directed to this problem, is in the natxire of
a search for some adaptation to finance of
the centimetre-gramme-second system of units.
Yet perhaps the most important fxmdamental
idea which can be conveyed at this time, in
regard to the money problem — an idea on
the validity of which certainly stands or falls,
anything I have to say on the subject — is
that it is not a problem of valm-measurement.
The proper function of a money system is to
control and direct the production and dis-
tribution of goods and services. It is, or should
be, an “ order ” system, not a “ reward ”
system. It is essentially a mechanism of
administration, subservient to policy, and it is
because it is superior to all other mechanisms
of administration, that the money control of
the world is so immensely important.

The analogy of the “ Limited ” railway
ticket is for all practical purposes exact, a
railway ticket being a limited form of money.

72

SOCIAL CREDIT

The fact that a railway ticket haa money-
value attached to it is entirely subsiduary and
irrelevant to its main function, which is to
distribute transportation. A demand for a
railway ticket furnishes to the railway manage-
ment a perfect indication (subject, at present,
to financial limitations) of the transportation
which is required. It enables the programme
of transportation to be drawn up, and the
availability of a ticket issued in relation to
this programme enables the railway traveller
to make his plans in the knowledge, that the
transportation that he desires will probably
be forthcoming. It is every whit as sensible
to argue that because there may only happen
to be one hundred tickets from London to
Edinburgh in existence, that, therefore, no
more than one hundred passengers may travel,
as it is to argue that because the units of
money happen at the moment to be insuffi-
cient (whether they are “ invariable ” or not),
therefore, desirable things cannot be done,
irrespective of the presence of the men and
the materials necessary to do them. The
ailment only assumes validity if a deficiency

73

SOCIAL CREDIT

of ticketis is a reflection of a real deficiency in
transport, and not vice versa.

The measurement of productive capacity
takes place, or should take place, in regions
other than those occupied by the ticket
office, or its financial equivalent, the bank,
and the proper business of the ticket depart-
ment and the bank is to facilitate the dis-
tribution of the product in accordance with
the desires of the public and to transmit the
indication of those desires to those operating
the industrial organisation, to whom is com-
mitted the task of meeting them. They have no
valid right to any voice whatever in deciding
either the qualifications of travellers, or the
conditions under which they travel.

It will no doubt be observed that there is
a close connection between the point of view
which it is here suggested is vital to a solution,
and the contrast indicated in the opening
chapter of this book, between the Classical
and the Modern system of education. Just
so long as a rigid abstraction is made the
test to which physical facts must conform
(and any theory of money which pretends

74

SOCIAL CREDIT

to measure values comes under this descrip-
tion), just so long must there be friction and
abrasion between the theory and the facts
(and facts are much harder than theories).
Dissatisfaction and disappointment in the
world as a result, can be predicted with
certainty. In other words, Utopia is —
Utopia. It has been said before, but it will
bear repetition. In a very literal sense, the
picture and specification of the world people
most undoubtedly want at the present time,
is, like the kingdom of heaven, within each
one of them, and their desires in general are not
more likely to be satisfied by a card-indexed
Paradise after the heart of Mr Sidney Webb,
than by an Imperialistic millennium ruled by
Mr Kipling’s “ Aerial Board of Control.” It
is quite arguable that material wealth, with
the emancipation it can carry with it, will
not bring happiness, but it is not arguable
at all that the vast majority of people will
take this truth, if it is truth, on hearsay. It
is as probable that a starving man will listen
patiently to a lecture on gluttony.

75

CHAI>XER VIII

CHAPTER VIII.

It has perhaps by now become possible to
obtain some sort of mental picture of the
policy controlling the world in which we live,
and having done this it should be easier to
make some comparison of this policy with
one to which more general acquiescence might
be obtained. It must be recognised that the
great elementary human emotions, desire and
fear, are employed with great skill by the
Invisible Government, in the guise of rewards
and punishments, to obtain certain results.
These results, it would appear, could not
have been obtained, had not a large majority
of the world’s population been cajoled or
forced into doing a great deal of work which
momentary necessity did not, in point of
fact, render inevitable. Only in this way
could have been produced enormous reserves
of real capital, by which is meant plant,

78

SOCIAL CREDIT

buildings, tools, and still more important,
the knowledge, organisation, and processes
necessary to their application; and only by
this building up of capital, it would seem,
has further progress become possible. In the
earlier centuries of the present era, even war
seems to have been justifiable in a very broad
sense, both as an elimination test, and as a
stimulant to invention and initiative. It is
also difficult to conceive of any plan by which
the possible advantage of the individual could
have been advanced so rapidly, as by his
temporary submergence in large groups, to
which we give the name of nations or races.
All this may be admitted as being applicable
to within comparatively recent years, let us
say to the middle of the last century, just
as we may often be prepared to admit that
a statesman who, under post-war condition
has become a hindrance to progress, rendered
vital service under circumstances suitable to
his talents.

But because a thing was once sound and
desirable, it is by no means necessary to
admit that it is permanently advantageous.

79

SOCIAL CKEDIT

Largely because of the progress in the
industrial arts, but not less as the result of
a general spread of education, a system of
world organisation which is based on the
deception of the general public, the practical
necessity or expediency which might perhaps
be excused in the past, has now become both
undesirable and actively and practically
vicious.

The re-action of a threat on the highly
strung human product of modem civilisation
is utterly dissimilar from that which was
obtained a few hundred years ago. War
has become definitely dysgenic. So far
from killing off the weakling and the slow-
minded, it has a strong tendency to remove
these, together with the shirker, to a point
distant from the field of conflict, and in
many cases to place them in a position of
subsequent advantage both financially and
otherwise, as compared with bolder and more
enterprising compatriots. And human in-
telligence has at any rate progressed to the
extent that a method of stimulating industry
similar to the holding of a carrot continuously

80

SOCIAL CREDIT

in front of a donkey’s nose to produce
progress, has ceased to function effectively.
Even an ass has a rudimentary sense of pro-
portion between miles walked and carrots
achieved. If the principle objective to which
humanity might reasonably be directed, were
the same as that existing five hundred years
ago, it is nevertheless quite clear from the
general unrest, that the methods by which
general co-operation can be obtained require
considerable and early modification. But this
objective is not the same.

It seems indisputable that the maintenance
of a unit of human life involves a process of
metabolism, or, in other words, the breaking
down and building up of form through the
application of energy. When men main-
tained themselves by manual labour, this
process was very nearly a closed cycle, that
is to say, it took a very large proportion of
the energy which mankind acquired through
food, to maintain life. There is inductive
support for this line of thought in the con-
sideration of such civilisalaonB as those of
India and Persia, which were at a substantially
81 G

SOCIAL CREDIT

similar stage less than one hundred years
ago, to that which they had reached three
or more thousand years ago. Even to-day,
there are thousands of square miles in the
Middle and Far East, in which both the
habits of thought, and manner of life, are
undistinguishable from those recorded in the
earliest literature with which we are
acquainted. The cycle was, in all probability
not quite closed, or under the law of the
conservation of energy, which can be assumed
to apply in some form, no progress would
have been possible ; and it is quite reasonable
to argue that the slight increment of energy
which permitted the upward spiral of
evolution, was derived by direct absorption
of the energy of the sun’s rays.

But the inductive or experimental method
of attack on the problems of life which may
be said to be the outstanding featiu% of the
Renaissance in the West, resulted in a pro-
found disturbance of the premises of human
existence. From the moment that the first
crude steam engine pumped the first gallon
of water, if not before, the metabolic cycle

82

SOCIAL CREDIT

contained a factor, a new method of entrance
for solar energy, which was bound to result
in a much steeper spiral of ascent. And at
the present time it seems reasonable to
believe that we have reached a point at which
we are within sight of a considerable release
of human energy from the mechanical drudgery
of existence by toil.

The outcome of this must surely be obvious.
So far from the mere sustenance of life through
the production of food, clothing, and shelter
from the elements being, with reason, the
prime objective of human endeavour, it should
now be possible to relegate it to the position
of a semi-automatic process. Biologists tell us
that the earliest known forms of life devoted
practically the whole of their attention to
the business of breathing. Breathing is not
less necessary now than it was then, but only
persons sufEering from some lamentable
disease pay very much attention to the
process. _

It is not relevant to the purposes of this
book to indicate the new objective to which
human energy will in all probability re-direct
83

SOCIAL CREDIT

itself. It is merely intended to suggest the
possibility of the re-orientation, and the
methods by which at the moment it is being
hindered, in order that those hindrances may
be removed.

Now it is quite probable that a recognition
of the truth of the foregoing ideas, although
not formulated, underlies a great deal of the
opposition to any sort of reform, on the part
of the more favourably situated individuals
in society. These persons recognise that they
have, in their fortmiate position, something
worth retaining. Whether a satisfactory use
is always made of the opportunity which is
theirs, is for the moment, entirely outside the
argument. Until fairly recently, nearly every
proposal for a change has attacked their
position. They have replied, and with reason,
that they have just as much, or if it be
preferred, as little claim to consideration as
those persons who have attacked them, and,
in any case, there they are, and there they
mean to stay. This incidentally demonstrates
the futility of abstract justice when in
opposition to the solid facts of life.

84

SOCIAL CREDIT

In thus opposing claims for a general levelling
down of the amenities of modem civilisation,
such persons were probably on sound ground,
although the tactics adopted by them may
have been of dubious sagacity ; but it is to
be feared that in many cases, this opposition
to a bad change, has become crystallised into
opposition to a change of any kind. It may,
therefore, be of practical value to emphasise
the undoubted fact that at the present time
the alternative is not between change and
no change, but between a change for the
better, or a change for the worse. If the
present system with its sanctions of rewards
and punishments, were working satisfactorily
or even tolerably, nothing could be more
academic than the discussion of more desirable
alternatives, even though the logic applied to
such proposals might demonstrate with crystal
clearness that an advantage was thus to be
obtained. But the facts are wholly otherwise.
It is almost certain that were there no pro-
posals of any sort, good, bad, or indifferent.
Socialistic, Communisiac, or Imperialistic,
being pressed forward at the present time,

86

SOCIAL CREDIT

by every means and sanction which can be
applied to them, the present social and
industrial system would no longer work. As
we shall shortly see, there are quite definite
mechanical defects in it, and the result of
those mechanical defects is to produce a
psychological re-action, which can only result,
if allowed to proceed to its logical conclusion,
in a state of affairs which will involve both
the temporarily fortunate and the temporarily
imfortunate, in a common chaos.

For at least forty years the doctrine of
Sabotage, i.e. the conscious restriction of
output, has permeated all sections of Society
and is a logically, and in a restricted sense,
a perfectly proper method of obtaining the
best results for the individual imder the
rules by which business and society is at
present conducted. Not to admit that, is
to shirk facts. And not to see that this
restriction of output (using the phrase in its
very broadest sense, to include all descriptions
of unspecified activity at present widely out-
side the range of economics), is nothing but
social suicide, is equally to shirk facts. The

86

SOCIAL CREDIT

test of a natural law is that it is automatic
and inexorable, and the proof of the con-
tention wMch is advanced in this book, that
as soon as Society ceases to serve the interests
of the individual, then the individual will
break up Society, is proved by the course
of events at this time ; and those persons
who wish to preserve Society can do no worse
service to their cause, than to depict their
idol as an unchangeable organisation whose
claims are to be regarded as superior to those
of the human spirit.

The stage is set for a change of mechanism ;
in place of a Society based on restraint, a
Society based on the conception of assistance,
of co-operation, is overdue. Let us be clear
that the only assistance which is tolerable
or acceptable is that which can be declined
if it is not wanted.

87

PART II.

THE

MECHANISM OF THE CLASSICAL IDEAL

CHAPTER I.

CHAPTER I.

Ip the considerations thus far advanced are
accepted as valid, certain conclusions seem
inescapable. A system of Society which
depends for its structure on the theory of
material rewards and punishments, seems to
involve, fimdamentally, a general condition
of scarcity and discontent. You cannot
reward an individual with something of which
he has already sufficient for his needs and
desires, nor can you easily find a punishment
which will be effective in a world in which
there is no incentive to crime. We might
legitimately expect, in such a society, a
mechanism which wotild ensure a continual,
and, if rendered necessary by the advance-
ment of science, an artificial disparity between
demand and supply of material goods and
services, together with an organisation which
would prevent any infringement of the rules
by which this disparity is maintained.

90

SOCIAL CREDIT

We do, in fact, find exactly such a state
of affairs in the world to-day. The exact
methods by which the financial orgamzation
produces, at any rate, the illusion of scarcity
will demand our attention almost at once,
and at some length ; the organisation by
which these arrangements are enforced is, of
course, familiar in the form of the Common
Law.

It is astonishing to what an extent the
co-operation between Finance and Law
extends without attracting any considerable
body of specific comment. What is called
Civil Law is concerned almost wholly with
matters which can be referred ultimately to
the Money System. That is obvious. But
it is not less true to say that an overwhelming
majority of so-called criminal cases can be
traced, either directly or indirectly, to a
financial incentive. Even crimes of passion
incontestably arise, in the overwhelming
majority of cases, from physiological or psycho-
logical re-actions which can be traced back to
economic or financial origins. The world is
full of oi^ganisations for the suppression of

91

SOCIAL CREDIT

such social evils as inebriety and prostitution.
The financial origin of the latter hardly
needs emphasis, but it is not so generally
recognised that habitual industrial overstrain,
long hours, and insanitary conditions of work,
and the excessive indulgence in alcoholic or
other artificial stimulation, are almost invari-
ably found in one and the same geographical
locality. And in nearly every case, attention
is directed to the suppression of the symptom,
rather than to the removal of the cause, with
the result that the partial suppression of one
evil is only achieved at the cost of producing
a fresh and probably more insidious disease.

It has already been, it is hoped, made clear
that the gap between Demand and Supply
has nothing to do with the ability of the
production and industrial system to meet the
calls which are made on it ; it has to do with
the organisation which stands in between
Demand and Supply, that is to say, the
Financial or Ticket System. In other words,
the persons who want and cannot do without
the goods which the productive and industrial
syst^ can, and is anxious to supply, have

92

SOCIAL CREDIT

not in their possession the tickets, the pos-
session of which is essential before these goods,
under present conditions, can be handed over.

Now this condition has not entirely escaped
attention, but most, if not all, of the attention
which has been directed to it is, I think,
stultified by accepting as true, premises
which proceed from the very system which
is attacked. There is, of course, the crude
idea on which, originally, most of the ortho-
dox labour-socialist propaganda was based.
Observing the condition we have just outlined,
the simple suggestion was put forward that
the majority of the population were so poor,
became a minority were so rich. This simple
explanation died hard, even if it can be said
to be dead. It siuvived a number of
statistical investigations, mostly with the
intent of showing that we do not work hard
enough, of which perhaps the latest and most
complete have proceeded from the London
School of Economics, an institution which
combines the cmious qualities of being the
fount of financial orthodoxy, staffed by the
flower of Socialistic personnel, chiefly chosen

93

SOCIAL CREDIT

and paid by bankers and/ financiers. Pro-
fessor Bowley, who was, if I am not
mistaken, connected with this institution, in
a treatise on the Distribution of the National
Income, referring to a period immediately
preceding the first world war, estimated that
the total British income in excess of £160
per family per armum, was only £260,000,000
Taking the population of Great Britain as
forty-five millions, and the average number
of persons per family as about 4‘6, which is
a very usual assumption, it is clear that
an absolutely “equitable” division of this
income would result in an increase of the
average family income by £26 per aimum,
which can hardly be said to be a remarkably
promising basis for a sweeping reform by taxa-
tion. As in addition, such a distribution would,
under present conditions, make the possession
of such articles as motor cars impossible to
any private owner, and so would completely
inhibit their production, and the wages,
salaries, and dividends distributed in respect
of that production, it must surely be obvious
that an explanation more complex than this

94

SOCIAI. CKEDIT

must be looked for. The point we have to
make is not merely that financial purchasing
power is unsatisfactorily distributed, it is
that, in its visible forms, it is collectively
insufficient.

One stage in advance towards this end is
the theory generally associated with the name
of Mr J. A. Hobson, who attributes the
general lack of purchasing-power ; the fact
of which he most properly emphasises, to the
undue investment of savings, on the part
of the more fortunate members of society,
in what are termed capital undertakings,
with the result that production of capital
goods is in excess of the amount required.
That such xmbalanced production does take
place, is unquestionable ; but that Mr
Hobson’s explanation is inadequate to explain
the process which accompanies and compli-
cates this unbalancing, is, I think, not less
certain. Nor does this theory accoimt for
the collective growth of bank deposits.

Both of these explanations really proceed
from a misconception of what actually takes
place in the financial and costing departments

95

SOCIAL CREDIT

of industrial organisations, and a further
failure to grasp the possible relation which
can exist between the abstraction of money
and the concrete physical realities to which
it relates. There is every justification for
these misconceptions ; they are strictly
orthodox in the sense of being the general
teaching of the majority of those persons
who claim to be experts on the matter ; and
it is necessary that they should be stated in
order that the invalidity of them may be
exposed.

This orthodox theory, then, assumes that
the money, equivalent to the price of every
article which is produced, is in the pocket,
or the bank pigeon-hole of somebody in the
world. In other words it assumes that the
coUedive sum of the wages, salaries and
dividends distributed in res'pect of the articles
for sale at any given moment, which represent
collective price, are available as purchasing-
power at one and the same moment. Certain
persons have more money in their pockets or
bank pigeon-holes than they wish to spend on
consumable goods. They do not spend it,
96

SOCIAL CREDIT

they save it, as the phrase goes. By this
abstinence from spending, they form a ftmd
which enables capital goods, i.e., tools, plant,
factories, to be paid for, and therefore
produced, and because of the process by which
these are paid for the capital goods thus
produced become the property of those persons
who have thus saved.

Now the first point to be grasped in regard
to this argiunent as a whole is that, even
supposing at any given moment it were true,
one week afterwards it could no longer be
true. If on a given day, there was extant
in the world, sufficient money to buy all the
goods in the world at the prices it had cost
to produce those goods, and any portion of
that money were applied to form the payment
for the production of new goods, then that
money so applied forms the costs of the new
goods, and immediately there is a disparity
between the total costs, which are the
minimum total prices of goods, and the
amount of money in the world which would
ex-hypothesi, be exactly the same as before.
This would be true even if no-one “ saved ”

97 H

SOCIAL CKEDIT

my further quantity of money. The persons
who had saved the money would not have
saved the goods which the original money
represented, they would merely have trans-
ferred their claims from the original goods in
existence to new goods, and could only “ get
their money back ” by the sale of those goods ;
nor would there be any mechanism in existence
by which the old goods could be bought.
That surely must be self-evident.

But the process does not stop there.
From the investor’s or “ saver’s ” point of
view, his only object in putting his money
into capital goods is to get an increased
amount of money back, and on Mr Hobson’s
assumption, in particular, he can only get this
money back from the public in the form of
prices. The condition then is, that there are
more goods in the world at each successive
interval of time, because of the financial
saving, and its application to fresh production,
while the interest, depreciation, and abso-
lescence, on this financial saving has to be
carried forward into the prices of production
during a succeeding period. Each pound

98

SOCIAL CREDIT

saved would be a pound withdrawn from
consumption and put into production. Since
costs must be less than prices, it only requires
a very simple examination of this condition
to see that the cycle woxild become unworkable
in a very short period of time, since no one
would be able to buy anything. Depreciation
alone would absorb the world’s purchasing-
power, although not seriously diminishing
the world’s true wealth, and if no other
factors intervened, we should have starved
in the midst of plenty many years ago.

In every criticism of the social distribution
of wealth made public prior to 1918, the
assumption is implicit that money or purchas-
ing-power is confined to legal tender, and that
bank deposits etc., on which cheques are
drawn, are deposits and withdrawals of legal
tender only. This is in part - equivalent to
saying that banks and financial institutions
only re-lend money which has previously
been lent to, or deposited with, them. There
is also a nebulous idea involved, I think,
to the effect that the man who grows, e.g.^
a ton of potatoes, also grows the purchasing-

99

SOCIAL CREDIT

power of a ton of potatoes. The facts are
far otherwise, as no doubt lai^e numbers of
potato-growers could testify. Given a fixed
amount of legal tender, and assuming legal
tender to be the only purchasing - power,
no amount of production would increase it.
Probably fifteen-sixteenths of the immediately
available purchasing-power in the world arises
out of bank loans or their equivalent in bills
discoimted. These loans and the purchasing-
power which they create have no automatic
relation to either production or consximption.
This question has aroused a good deal of
controversy and has been treated at some
length in previous volumes. But a short and,
I think, conclusive mathematical demonstra-
tion is available which may serve to dispose
of the matter.

Let Deposits =D.

Let Loans, etc., -L.

Let Cash in Hand = C.

Let Capital -K.

Then we have —

Assets -L+C.

Liabilities -D -f K.

So that L+C-D + K.

SOCIAL CREDIT

Differentiating with respect to time, we have-

dL dQ dD

being fixed, ^

Assuming that the Cash in Hand is kept

dC

constant — = 0*
di

Therefore

dt dt

which means of course that the rate of increase,
or decrease, of loans is equal to the rate of
increase, or decrease, of deposits.

Now this theorem that bank loans create
bank deposits, and the deduction from it that
the repayment of bank loans destroys deposits,
is vital to an understanding of the process
we have been discussing. The deficiency
between purchasing - power, and goods with
money prices attached to them, can be made
up (at any rate to a large extent), by this
process of creating bank money. This enables
the business cycle to be carried through.
And conversely, the refusal to create fresh
money by banking methods or otherwise,
whatever the cause of this refusal may be,
101

SOCIAL CREDIT

is sufficient to paralyse both production and
consumption. There is no doubt whatever
about the facts ; in the past three years we
have had the two conditions side by side ;
in Great Britain a restriction of credit and
consequent industrial stagnation ; on the
Continent, enhanced credit issues, and great
industrial activity.

The repayment of bank loans, unaccom-
panied by the destruction of the article
produced as a result of its creation, immobilises
an equivalent body of price values, so that
neither can the articles to which the prices
refer be sold, nor in the case of machinery,
etc., is it possible to make any charges in
respect of consumption goods which are
consequent on the use of such machinery,
without still further increasing the disparity
between the goods available still, and the
money available to buy them.

This is surely plain enough ; but it has
also to be remembered that this process of
repayment of bank loans, is a “ chain ”
process, which starts with the repayment,
by the last business concern engaged in the
102

SOCIAL CREDIT

manufacture of the articles, of the costs
and profits incurred by the stage of manu-
facture immediately preceding it. If this
operation be clearly visualised, it will be seen
that all payments of costs of goods supplied
by one business firm to another business
firm for re-sale, can be assumed to be the
repayment of bank credit, if the first stage
in the manufacture of the goods was financed
by a bank credit. But we can go further
and say, that the difference between finance
by bank credit, and finance from so-called
capital or savings, is only one of degree and
not of kind, since those very savings, as will
be seen by a careful examination of the fore-
going argument, had their origin in a creation
of credit.

We may now be in a position to appreciate
the bearing of the foregoing analysis on such
theories as those of Mr J. A. Hobson. We
have seen that the factor which modifies so
profoimdly the importance of the consider-
ations adduced by Mr Hobson, is that the
total inadequacy of the money available in
the hands of the public to buy the goods

103

SOCIAL CB.EDIT

normally available, at the prices necessitated
by the system under v?:hich they are costed,
is countered by the ability, and the normal
practice of banking and financial institutions
to create and circulate forms of purchasing-
power which function quite as effectively
as the sovereign or the Treasury note. This
circulation functions through wages and
salaries paid out in respect of future pro-
duction. Unlike the sovereign or the
Treasury note, however, these forms of bank-
created purchasing-power, are nearly always
redeemable within a definite period of time.
It is a feature on which the banks place the
most weighty importance ; and exactly why
this is BO is worthy of, and will receive, close
consideration in a succeeding chapter.

It is fair to say that almost any e^lanation
which is not a full and accurate explanation
of the working of the financial system, has
the curious result of playing directly into the
hands of the up-holders of that system.
The simple labour-socialist criticism, which
emphasises the contrast between the rich
and the poor, forms a perfect moral sanction
104

SOCIAL CREDIT

for the imposition of taxes on any portion
of the community which is above the star-
vation level, since to the man who has only
two hundred a year, the man with six
hundred a year is rich. And it is perfectly
logical on the theory that purchasing-power
is merely mal-distributed, that Mr J. A.
Hobson should devote much of his attention
also to taxation.

The business of dealing in money as a
commodity is, as has already been pointed
out, advantaged by anything which accent-
uates the scarcity of money, so that any
attack on the business system, the constructive
efiect of which is to support increased taxation,
can, and does receive support from the inner
circles of High Finance. Since the greater
part of the real purchasing-power of the
world is in a potential form which is not
represented by any figures anywhere, but can
be materialised by those in possession of the
secret of the process, as and when required,
taxation of visible purchasing-power is exactly
what is most valuable in maintaining the
power and supremacy — ^the power to reward
105

SOCIAL CREDIT

and punisli — of the money-" makers.” There
is probably not a " levelling-down ” move-
ment of any description anywhere, which
is imsupported from Lombard Street, Wall
Street, and Frankfort.

106

OTTAr'TEX^ II.

CHAPTER II.

In the foregoing chapter we have endeavoured
to establish two important propositions in
generalised terms. The first of these is ; —

(1) That the collective prices of the goods
available for sale at any moment in a given
community, if they have been produced by
ordmary commercial methods, cannot be met
by the money available through the channels
of wages, salaries and dividends, at one and
the same moment. They can be exported
in return for piurchasing-power, or they can
be destroyed, or they can be bought by
purchasing-power which is created and
distributed in resfect of a separate cycle of
production. This situation is worsened by
what is called saving, but is independent of
saving at the present time.

It may be noted that both in Europe and
America, there are numerous endeavours
being made, and theories propounded, to
108

SOCIAL CREDIT

explain this fact; which was, until recently,
denied as a fact. The foreword to a recent
work by H. B. Hastiugs, published in America,
remarks :

“ By an accounting method of analysis,
the conclusion is reached that the value, at
the ciurrent retail price-level, of goods pro-
duced far exceeds the flow of purchasiug-
power from permanent sources. In other
words, recurring periods of business depression
are shown to be the result of present financial
and business policies.

“ The importance of this new method of
approach to the most important of modem
economic problems is self-evident.”

(2) This situation would be almost im-
mediately destructive to the working of the
business system, if the financial technique did
not provide a source of purchasing-power,
or new money, in the form of bank loans
and credit-instruments, which does not arise
out of wages, salaries or dividends, paid for
past production.

While there are good, sound and fairly
obvious reasons why, in any case, the
109

SOCIAL CKEDIT

stupendous power of creating and destroying
the major portion of the purchasing-power in
the world should not be vested in the hands
of private and irresponsible persons, it is
quite probable that such considerations would
fail to produce any very radical alteration in
the system if they formed the only basis on
which criticism could rest. It is probable
that chattel slavery as an institution would
be more or less permanent if every slave had
been perfectly comfortable. That is to say,
the objection to the situation is that it does
not work, rather than that it is immoral.
While the power of creating effective money
has, up to the present time, enabled banks to
mask a good many of the defects of the finan-
cial system, it has, particularly in the last few
years, failed definitely to remedy some of the
more vital of them. The financial mechanism
has acquired a considerable control over the
the rate and the manner of issue of money
and purchasing-power, and to a large extent,
this power has become unified and centralised
so that it forms an international oi^anisation
of the most stupendous power, but it has
110

SOCIAL CREDIT

to a lesser extent only, achieved control of
the other aspect of finance which is exhibited
in the form of prices. It is true enough
that very widespread efforts have been made
on the part of the large Joint Stock and
International Banks to control general price
levels by increasing or decreasing the amount
of money available in the pockets of the
public. But these efforts may be said quite
definitely to have failed, or at any rate to have
fallen far short of the expectations of those
who have put them into operation.

The reasons for this failure are not far to
seek. The financial mechanism has a positive
and negative aspect, the positive aspect being
represented by the issue of money, and the
negative aspect being represented by the
exchange of the money thus issued for goods
and services, through the medium of prices.
It is quite obvious that if money is the only
claim upon goods and services, the less money
there is available, the more goods and services
each unit of this money will command, if there
is (dways a tviUing sdler. This is merely one
method of stating the well known quanti-
111

SOCIAL CREDIT

tative theory of money. It results from this
that if there were no other factors involved,
a contraction in the amount of available
money would result in a fall of prices, since
each unit would buy more goods and services.
And it is on this simple principle that,
particularly since 1920, the banks have en-
deavoured to control the general price levels,
more especially in Great Britain. While prices
have not fallen from this cause to anything
like the extent that they rose under a contrary
policy, the restriction of credit which has been
in operation since 1920, up to the early part
of 1923, has imdoubtedly tended to arrest the
spectacular rise in prices which was in progress
at the time of its initiation. The reason for
the limits which are set to the reduction of
general price levels by “ deflation ” is simple ;
when prices are reduced to approximately
the equivalent of costs, the willing seller
disappears.

Even this modified success has been achieved
at the cost of widespread distress arising out
of unemployment and bankruptcy, results
which must quite inevitably accompany such
112

SOCIAL CREDIT

a policy. The natural and mathematical
result of the operation of a financial and
costing system, which requires that all the
costs, or issues of purchasing-power, distri-
buted during the production of an article,
shall eventually be recovered in prices, is a
continuous rise in the cost of production of
any article produced by a given process.
This rise can be, and is, temporarily offset by
improvements of process, but only tempor-
arily.

Now any attempt, by current financial
methods, to reduce prices (or even to stabilize
them, as the phrase goes) is a mathematical
absurdity unless the cost of this stabilisation,
or lowering of prices, is met from some ex-
traneous source. Or to put the matter
another way, the margin of profit which
makes it possible for a producer to go on
producing, disappears unless the financial cost,
and consequently the price of production, is
allowed to rise steadily in relation to direct
labour cost. As a result of this, if prices are
forced down production stops, and stocks are
sold only at prices which mean loss, and
113 I

SOCIAL CREDIT

ultimately bankruptcy, to the manufacturer
and distributor.

To put the matter in a form of words which
will be useful in our further consideration of
the subject, the consumer cannot possibly obtain
the advantage of improved process in the form of
correspondingly lower prices, nor can he expect
stable prices under stationary processes of pro-
duction, nor can he obtain any control over the
programme of production, unless he is provided
with a supply of purchasing-power which is not
included in the price of the goods produced.
If the producer or distributor sells at a loss,
this loss forms such a supply of purchasing-
potver to the consumer ; but if the producer and
distributor are not to sell at a loss, this supply
of purchasing-power must be derived from some
other source. There is only one source from
which it can be derived, and that is the same
source which enables a bank to lend more money
than it origincdly received. That is to say, the
general credit. In spite of the immense strides
made in the direction of improved process since
1914, prices are still nearly double those obtaining
at that date, while industrial profits are much less.

114

SOCIAL CREDIT

It may now be possible to see with some
degree of clearness the di£6.ciilties in which
those institutions and organisations which
control the general credit at the present time
find themselves. It is true enough that they
can manufacture “ money ” to an almost
unlimited extent ; tTm power resting cm ike
general willingness of the public to accept
anything which will function as money. But
the psychology which has grown up on the
basis of the theory of rewards and punish-
ments forbids the exercise of this power,
except in return for services rendered. The
financial equivalent of all services rendered
in the production of an article, forms the
cost of that article, and conversely, nobody
will furnish any services in connection with the
article, which are not represented by cost, and
therefore go into price. The old fable of the
Fairy Gold which disappeared as it was grasped,
can thus be seen in its everyday embodiment ;
and the result of these creations of credit granted
to producers only, instead of to consumers, is
to produce a rise of prices which nullifies the
additional purchasing-power thus created.

115

SOCIAL CREDIT

There is, as a result of the problems created
in Great Britain by a restriction of credit, a
quite considerable body of persons, more
especiaUy among manufacturers, who are
almost openly demanding a large increase in
the volume of credit to be issued to manu-
facturers. It is hardly denied that such a
processs would cause prices to rise, and in fact
it is frequently argued in quarters which might
be expected to know better, that a rise of
prices would be an advantage, because it
would decrease the burden of the National
Debt, since the amount of money represented
by the National Debt would have a decreased
purchasing-power in goods and services.
There could hardly be a more vicious example
of the classical or static method of thought
and argument.

It is perfectly true that the National Debt
was created and appropriated, by methods,
subsequently to be explained, which are
indefensible from almost any point of view,
more especially as the greater part of the
Debt is held by financiers and financial
institutions. But a considerable, if minor,
116

SOCIAL CREDIT

proportion of tlie Debt bas been sold to
members of the public in return for money
which they obtained by legitimate methods,
and in addition to this, it is of course utterly
impossible to reduce the purchasing-power of
the National Debt without reducing, pro rata,
the purchasing-power of other descriptions,
however small in amount, of credit-instru-
ments held by the general public. Now to a
man who has one million pounds, it may be
a theoretical hardship or “punishment” to
reduce the purchasing-power of his one
million pounds to that of five hundred
thousand pounds, but the practical effect
on his scale of life and on his personal freedom
of his movements and initiative is nil. But
to reduce the income of the man who has two
hundred pounds per annum, to one hundred
pounds per annum, is the difference between
simple comfort and practical starvation.
And the number of persons who would be
adversely affected by a rise of prices, is in-
comparably greater so far as numbers are
c(mcemed, than those who are hit by a fall
of prices. The appropriation of large blocks
117

SOCIAL CREDIT

of public credit is buccaneering ; but the
filching of the widow’s mite by a “ gradual ”
rise 01 prices, is pocket-picking of the meanest
type. It is not necessary to condone the
monopoly of Public Credit, or to acquiesce in
it, in order to agree that inflation is the very
core of the evil. There is almost nothing to
be said for a policy of deflation, as defined by
the average banker except that it provides a
breathing space in which to consider what to
do ; the real argument against it is not that
it reduces prices, but that it only does so at
the expense of the producer; but a policy
of inflation, that is to say, a policy of increasing
issues of money or credit, in such a manner
that it can only reach the general public
through the medium of costs, and must,
therefore, be reflected in prices, has one thing
and one thing only to be said for it at this
time *, that it is absolutely and mathematically
certain to reduce any financial and economic
system to mins. It is in fact a Capital Levy
of the meanest and most one-sided description
since it taxes the purchasing-power of those
who obtained it by work for the benefit of
118

SOCIAL CREDIT

those who obtain it by financial manipula-
tion.

The condition which is produced by a policy
of restricting the amount of money in circula-
tion, can be grasped without difficulty if it
be remembered that it must involve a
numerical decrease in both the total figures
of cost and the total figures of price for a
given period of production. The only portion
of the total costs which can be decreased
without loss to the producer, are those repre-
sented by wages and salaries, the remainder
being fixed charges based on the capital costs
already incurred. Wages and salaries costs
are purchasing-power, and collectively are
much less than collective prices. Imagine
both collective wages and collective prices to
be diminished by an equal amount x. This
may be written : —

Costs “purchasing power.

Costs are <prices.

. Costs .

— 1S<1.

Pnces

Costs -X . . Costs
Prices -a; ^ ’Prices
119

SOCIAL CREDIT

An addition to both the numerator and
denominator of the fraction, such as is brought
about by a rise of wages, accompanied by a
rise in price, has, of course, the opposite
effect ; it brings the ratio of purchasing-
power to prices nearer, though never to unity,
with the result, seen in Germany, of immense,
though tmstable, economic activity, accom-
panied by great hardship to the professional
and rentier classes, both of whom have claims
to consideration, and a most undesirable
concentration of economic power, resulting
infallibly in the enslavement of the artisan.

Even without demonstration, therefore, it
is easy enough to see the effect of either
deflation or inflation by the exercise of analyti-
cal methods ; but nothing of the sort is now
necessary. A full scale demonstration of botb
of them has taken place since Chapter XIII.
of “ Credit Power and Democracy ” was
written ; and the course of events in Germany,
under a policy of reckless inflation of credit,
reappearing in prices has followed with some
exactness the sequ^ce, both economic and
psychological, which was explained therein,
120

SOCIAL CREDIT

and can be considered and compared with the
contemporaneous restriction of credit in Great
Britain, During a few months of 1923 a
condition of fairly steady, though high prices
was maintained at the cost of increasing
industrial stagnation ; and the fact that this
situation changed into an era of rising prices,
accelerated by every efEort to grapple with
the “ imemployment ” problem by orthodox
methods, should be conclusive proof of the
inability of the existing financial system to
carry out the policy of “ Stabilisation.”

121

cii^i»xe:r

III.

CHAPTER III.

It was pointed out in Chapter VI., Part One,
that there are two separate and distinct
inducements to what is called employment.
The first of these inducements is involved in
the necessity imder which humanity labours
to provide itself with bed, board, clothes,
and such so-called luxuries as are effective
in setting free individual energies. That is
an elemental necessity imposed by the natural
conditions of our existence, and it is a primary
necessity, in the sense that imtil it has been
met we are not free to devote our attention
to other matters. It is quite incontestable
that the most efficient method of dealing with
this primary necessity so far evolved, is by
co-operative methods such as have been
incorporated in the industrial system of the
past hundred years or so.

But the second necessity under which men
124

SOCIAL CREDIT

and women labour, after the primary necessity
has been met, can broadly be described as the
satisfaction of the artistic instinct ; which
can be further analysed and defined as the
incorporation in material forms, of ideals
conceived in the mind.

It is one of the numberless evidences of the
sldU and knowledge of human nature which
is resident in what we have called the Invisible
Government, that these two human necessities
are confused in many arguments which
proceed from apparently divergent authorities
on industrial and social questions, which
arguments when analysed, may be seen to
buttress the classical ideal. Until recently,
the statement that a large body of the public
lived on the verge of starvation, becatise it
was xmemployed, and that, therefore, the
problem of the modem world was the abolition
of unemployment, received almost universal
assent. It is fair to say that opinion is no
longer so unanimous on this matter ; and in
consequence, from the position of being stated
as an axiom, it may be observed that it is
receding into the position of a proposition to
125

SOCIAL CREDIT

be proved, and the confusion to which we
have just referred is more or less successfully
invoked to this end. Heavy taxation, bank-
ruptcy and general industrial stagnation, are
paraded by the Press and the average business
man, to support the statement that “ markets
must be foimd for our goods.” Such “ Labour
Leaders ” as Mr J. H. Thomas have been
tireless in explaining with somewhat unctuous
rectitude that their constituents desire work,
not doles. It is important to examine what
may be behind this statement, and in order
to do this, and because those for whom Labour
Leaders are supposed to speak are much in
the public eye as the sufferers by unemploy-
ment, we may begin by examining that form
of distribution of purchasing-power, popularly
called the “ Dole.”

In the first place, the term “ Dole ” carries
with it a definite stigma as of an allowance
made by charity to persons unable to help
themselves. It carries the smallest possible
suggestion of self-respecting independence.
The origin of this designation as applied
to the unemplo3anent allowance is obscure,
126

SOCIAL CREDIT

but it may be assumed that it did not,
like Topsy, grow out of nothing. The
payment of the thing itself is hedged round
with such forms of indignity and incon-
venience as the official mind, with every
stimulus to activity, can devise, and although
fundamentally the dole is a small dividend
on the National Income — a forerunner of
“Dividends for All” — ^it is certainly the Cinder-
ella of dividends, and is treated accordingly.
Collectively, it is put in the foreground as
being one of the chief sources of expense
contributing to the burden of taxation imder
which the rest of the commimity is struggling,
and thus has the effect of creating a feeling of
hostility against its unfortunate recipients,
which may be compared with the orthodox
Socialist outcry against other and more
familiar forms of dividend. The enforced
leisure enjoyed by those who participate in it,
is rendered practically valueless by the regula-
tions which surround it. To be seen doing
an hour’s casual work is to render a member
of the unemployed liable to penal servitude
for fraud, and the passport-system of Russia
127

SOCIAL CREDIT

was simple in comparison with the forms
necessary to regularise half a day’s wood-
cutting, by an individual registered at a
Labour Exchange. And it must be borne in
mind that the dole does not represent anything
but a claim on goods of the simplest description,
of which the persons from whom it is collected
in taxation already have enough for their
needs, and thus are merely restricted from
the satisfaction of further requirements.

And yet in spite of all this it is notorious
that to be unemployed and drawing the dole
for any length of time, means in all probability
that the individual concerned will never
seriously compete for steady enployment
again under the conditions which exist at present.
That is to say, given the satisfaction of the
primary necessity for bed, board and clothes,
even under the most disadvantageous con-
ditions, the human individual can find more
attractive forms of outlet for his activities
than those which are afforded by the present
day industrial system, taking into considera-
tion its hours of work, remuneration and
general amenities ; and it requires the assxirance
128

SOCIAL CREDIT

chiefly found in millionaires to assess the
comparative value of such activities either
to the individual or the community, under
the conditions which exist in the world to-day.
It may be said that at any rate they do not
accelerate the progress towards another Great
War, which would unquestionably be the result
of general employment in production for export.

Now it is perfectly fair to say that Labour
Leaders are, although they may not con-
sciously know it, amongst the most valuable
assets of the financial control of industry —
are, in fact, almost indispensable to that
control ; and the reason for this is not far
to seek. They do not speak as the repre-
sentatives of individuals, they speak, as they
are never tired of explaining, as the repre-
sentatives of Labour, and the more Labour
there is, the more they represent. It is
natural that employment should be represented
by them as being the chief interest of man ;
as the representatives of the employed, their
importance is enhanced thereby. As a con-
sequence, the battle between the employing
interests and the labour leaders who claim
• 129 K

SOCIAL CREDIT

to represent the employed is, and must be,
fundamentally, a stage battle, since there is
a consensus of opinion on both sides that what
is wanted is more employment. There is
nothing like leather.

Considering the matter always from a
practical point of view, it must be evident
that the soundness of this stress on the prime
necessity for continuous and general employ-
ment, using that term in the narrow sense
of commercial employment for wages, rests on
quite other grounds than the use of employ-
ment as a means for distributing wages, —
can, in fact only rest on the premises of either
the Modernist, or the Classical idea. In
regard to the first of these, it is obviously
dependent on how much human effort is
necessary at the present stage of industrial
progress, to produce a generally satisfactory
standard of material civilisation, and the
proportion that the amount of human labour
necessary for this purpose bears to the number
of individuals who are willing, without pressure
of any kind, to employ a reasonable proportion
of their time in meeting tUs requirement.

130

SOCIAL OKEDIT

It has previously been suggested that the facts
in relation to this situation do not furnish
any justification for suggesting that even a
large number of commercially unemployed,
necessarily threatens the material welfare of
the community, and there is a large amount
of sound evidence pointing in the opposite
direction.

But we can go further. It is not sufl&cient
to say that the unemployment problem, as
distinct from the distribution problem, is very
largely a delusion. As we have seen in the
immediately preceding chapters, there is an
employment problem m the sense that our
financial mechanism does not bear any specific
relation to, nor fundamentally does it take
any account of, the introduction into the
equation of production of solar energy in its
various forms. To put the matter another
way, if the unemployment problem were
solved to-morrow, and every individual
capable of employment were employed and
paid accordiog to the existing canons of the
financial system, the result could only be to
precipitate an economic and political catas-

191

SOCIAL CKEDIT

trophe of the first magnitude, either through
the fantastic rise of prices which would be
inevitable, or because of the military con-
sequences of an enhanced struggle for export
markets.

Why, then, is there so great a misdirection
of attention in a matter of such primary
importance ? There is, I think, only one
general and comprehensive answer which can
be given to this question ; and that is, that
whether consciously or not, there is a wide-
spread feeling on the part of executives of
all descriptions that the only method by
which large masses of human beings can be
kept in agreement with dogmatic moral and
social ideals, is by anranging that they shall
be kept so hard at work that they have not
the leisure or even the desire to think for
themselves.

The matter is rarely stated in so many
words. It is more generally suggested that
leisure, meaning by that, freedom from em-
ployment forced by economic necessity, is
in itself detrimental ; a statement which is
flagrantly contradicted by all the evidence
132

SOCIAL CREDIT

available on the subject. It is hardly an
exaggeration to say that 75 per cent, of the
ideas and inventions, to which mankind is
indebted for such progress as has been so far
achieved, can be directly or indirectly traced
to persons who by some means were freed
from the necessity of regular, and in the
ordinary sense, economic employment, in spite
of the fact that such persons have never been
more than a small minority of the general
population. Even where transcendent genius
has been able to overcome the limitations
of financial stringency, it is highly probable
that the results achieved have been nothing
like those which would have enriched the
world had those barriers been non-existent.
To use a somewhat homely simile, it is common
knowledge that every racing stable produces,
a very much higher percentage of ‘’weeds ” than
potential Derby winners ; but he would surely
be foolish who would suggest that the way
to get more Derby winners would be to work
horses of every description at the plough.
It is probably true enough that there is an
appreciable percentage of the population in
133

SOCIAL CREDIT

respect of wbich any sudden access of material
prosperity would be attended with consider-
able risk, and for that reason the transition
from a state of artificial scarcity such as
exists at the present time, to a state of pros-
perity, is most desirably accomplished by
methods which do not too suddenly invest
such persons with powers which they have
not learnt to use. But to suggest that an
obsolete and generally outgrown system of
organisation, must be retained because of
this risk, is to refuse to develop the railway,
because of its detrimental efiect upon the
stage coach.

We are thus, I think, justified in concluding
that this misplaced emphasis on “ Unem-
ployment ” can be explained only by reference
to theories which are “ Moral ” rather than
“ Economic ” ; and we are not obliged to
take the “ Morals ” of the Labour Leader as
proceeding firom a source other than that
to which we can trace his Economics.

134

CHAJPTBR IV.

CHAPTER IV.

Before returning to a consideration of the
working of the financial mechanism, with a
view to understanding the maimer in which
it is made subservient to a Classical rather
than a Modern conception of society, it may
be useful to examine further ideas which are
invoked to give support to the policy ; and
one of such ideas which is being worked hard
at the present time is that of the necessity
for economy.

To the ordinary individual at his wit’s end
to achieve the task of making a small income
meet an expenditure which invariably
threatens to exceed it, the necessity for such
economy would seem obvious and unanswer-
able. To those who have followed the
arguments adduced in the preceding pages,
it will be clear that there is a good deal to
be said after granting, readily, the fact that
the money incomes of the population are
136

SOCIAL CREDIT

reduced by taxation, unemployment and
otherwise, to a point at which lavish spending
is quite impossible. It is probable that at
the present time there are 25 per cent, more
shops or goods-distributing centres in Great
Britain than there were in 1914, and it
certainly would be difficult to suggest that
those shops are empty of goods. It is im-
possible to take up a daily newspaper without
observing that the major portion of it is
devoted either to the necessity of increasing
trade, or to the discussion of subjects whose
interest largely depends upon that necessity,
and one of the simplest and most obvious
questions which arises, is the enquiry as to
how the shops are to be emptied of their goods
and this all important “ Trade ” is to be
stimulated and expanded, if everyone is more
economical ; which would appear to mean
that they are to spend less, and save more.

This idea of thrift, like that of economy,
is an example of the perversion of an
idea which has lost its original application.
When the business of obtaining bed, board
and clothes did, in fact, necessitate the appli-
137

SOOIAL CREDIT

cation to it of the major portion of the day,
it was a sound and far sighted policy to
simplify these needs as far as possible, not
because there is any inherent virtue in
simplification per se (which is a common
delusion), but because the setting free of the
time of the general population for other aims
was a valuable achievement. But the de-
vastating rigidity of thought, which is a
distinguishing characteristic of the Classical
or “ Moral ” mind, fastened on this situation
and crystallised it into a static virtue. Once
a virtue, always a virtue. The fact that there
is no physical limitation to the satisfaction of
reasonable material requirements — ^that in fact
there is no such thing in the modem world
as a poor country in any sense other than
scarcity of tickets to operate satisfactorily as
purchasing-power — only serves to transfer this
exhortation to be thrifty, from goods of which
there is a surfeit, to money of which there
is a scarcity. The situation is similar to that
of a man provided with every form of food,
and with coal, wood and matches with which
to cook it, but who is accustomed to cook his
138

SOCIAL CREDIT

food upon a paraffin stove, and is informed
that there is only a pint of paraffin left, and
that in consequence the most rigid economy
of food must now and in the future be enforced.
And the extraordinary part of it is that the
world in general as represented by the man,
seems unwilling to try the efiect of either
wood, coal, or any other fuel than the meta-
phorical paraffin ; or even, if forced, to eat his
food uncooked. It is hardly necessary to
stress the attractions of this situation to the
paraffin merchants.

Taking the situation as it is, and assuming
an increasing capacity to produce and deliver
goods per unit of time as the consequence of
scientific progress, it is not difficult to see
where obedience to this parrot cry of economy
must lead us. If it does, in fact, reduce or
even stabilise our consumption of the goods
produced, and the hours of work, and the
number of commercial workers remains the
same, then, not only is unemployment
stabilised, but either a greater proportion of
the production of these workers must year by
year be exported, or in some way or other,
139

SOCIAL CREDIT

more and more producing organisations must be
built up and tbe problem complicated at
compound interest. Since, under these con-
ditions, every country would be an exporting
country, and the exporting of goods to other
planets is not at present practicable, it is
not difficult to foresee that complications may
inevitably arise. When in addition we see
the purchasing-power of “ savings ” constantly
filched by rising prices and predatory taxation,
and finally threatened by a Capital Levy,
the adjuration to “ save more ” seems to
under-rate even the meanest intelUgence.

The word “ economy ” originally meant the
management of the household, just as “ thrift ”
originally meant progress in achieving a
happier and therefore saner state of life, and
in this sense it is clear enough that both words
still have a definite and useful meaning. But
so far from the financial economy and thrift,
which is so constantly preached at the present
day, representing either good management or
sane progress, it is mathematically demon-
strable that it can only result in unbalanced
production and consequent catastrophe. The
140

SOCIAL CKEDIT

only object of production is consumption,
whether that consumption takes the purely
material form in which the word is commonly
imderstood, or whether we extend its meaning
to include the artistic gratification which is
to be obtained from production carried out
under suitable conditions. And so far as
production either fails, or is in excess in
respect to these demands, neither economy
nor thrift, in any true sense of the word,
can be involved,

A further example of the perversion and
mis-use of words, in order to obtain the defeat
of the concrete embodiment of those words,
is in regard to the common use of the word
democracy, and its glorification as an end in
itself. In so far as the word is used to suggest
the detailed administration of public affairs by
the majority, it is a pure fantasy, and not
only never has existed, but it would seem
probable, could never in the nature of things
exist. In any kind of world of which we have
any conscious experience, it would be a night-
mare. If ten men be selected at random, and
problems of graded difficulty be submitted to
141

SOCIAL CREDIT

them, it is possible that the very simplest
problem will be solved by aU of them, but a
point will rapidly be reached at which a
decreasing minority will have any grasp of
the subject at issue. In so far as the matters
submitted to their judgment are not matters
of precedent (and progress consists in a con-
stant departure from precedent) it is quite
certain that the minority of our selected ten
will tend to be right, and the majority will
always be wrong. On matters of policy,
however, in sharp contradistinction to the
methods by which that policy should be
carried out, the majority may be tnisted to
be right, and the minority is very frequently
wrong. To submit questions of fiscal pro-
cedure, of foreign afiairs, and other cognate
matters to the judgment of an electorate is
merely to submit matters which are essenti-
ally technical to a community which is
essentially non-technical. On the contrary,
broad and even philosophical issues, such as,
for instance, whether the aim of the industrial
system is to produce employment, or whether
it is to produce and distribute goods, are
142

SOCIAL CREDIT

matters of policy, and it is very noticeable
that such matters are kept as far as possible
from the purview and decision of the general
public. In fact, the aim of political wire-
pullers is to submit to the decision of the
electorate, only cdtemative methods of em-
bodying the same policy.

The domain of policy comprises the removal
of executives if the results achieved are unsatis-
factory. Although the general public has par-
tially awakened, during the past few years, to
the immense power exercised by the permanent
and superior Government Services, it is very
probable that few persons who have not
intimate experience of the workmgs of a great
Government Department, understand how
completely the Permanent Heads of those
Departments are immune from public control.
They are, in the first place, appointed under
a system which ensures that they shall possess
a habit of mind suitable for incorporation in
the formal machine of government (and in
passing it may be noted, that for success in
this ioitial stage, a purely Classical education
is almost essential). Once appointed, their
143

SOCIAL CREDIT

promotion and success is subject to secret
influences whose ramifications may be said
to extend to the ends of the world. The osten-
sible, or “ Political ” head of a great Govern-
ment Department, is a mere tool in the hands
of the superior Permanent Ofiicials (and this
is pre-eminently so in the case of the Treasury).
It is not a difficult matter for the Permanent
Officials of a Government Department to
obtain the removal of the Political Head of
it, but it is a matter of practical impossibility
for the Political Head to obtain the removal
of one of his own Permanent Officials. As a
result, “ Democracy,” of which we hear so
much, is defeated at the source ; and it is
this brand of ineffective democracy, forming
the best possible screen for the operation of
forces which are invisible and are not subject
to criticism, which we are so constantly
exhorted to preserve.

It should be clear without reiteration that
this condition of affairs can only exist to
perfection as a result of collectivist psychology.
The prime duty of a State Servant is obedi-
ence — ^impersonality ; a surrender of individual
144

SOCIAL CREDIT

judgment to a policy not necessarily under-
stood. As we have previously indicated,
there is a great deal to be said for this arrange-
ment in the practical world of affairs, provided
that the sources from which the policy
originally proceeds are such as will stand the
light of the fullest publicity ; but when, as
is the case at present, the policy is derived
from sources which shun publicity by every
means in their power, unquestioning obedi-
ence, so far from becoming a public duty,
becomes a public danger.

146

L

V.

CHAPTER V.

It has already been suggested that there is
extant in the world, a common, if somewhat
nebulous, idea that whoever, for instance,
grows a ton of potatoes, grows thereby in
some mysterious way, the purchasing-power
equivalent to a ton of potatoes. This idea,
while not .specifically expressed in words, is
sedulously fostered by the Press, and by the
other media of propaganda which are em-
ployed to convince the public that our
economic difficulties proceed from insufficiency
of production. It is significant that the
peculiar brand of economics popular amongst
Marxian-Socialist and Communistic propa-
gandists is at one with apparently more
orthodox economists, in suggesting the com-
parative unimportance of money in the
economic system; that it is nothing but a
reflection of the economic facts beneath it.

If I grow a ton of potatoes and exchange
148

SOCIAL CREDIT

those potatoes for ten Treasury Notes of one
pound each, held at the moment by my
neighbour next door, all that has happened
is that I have ten pounds which he had before.
My ton of potatoes has not increased the
number of pounds, although it may have, but
probably has not, increased the purchasing-
power of each pound. If we imagine this ten
pounds to be the only ten pounds in existence,
and money to be the only effective demand for
goods, no-one will be able to exchange any
goods until I part with, at any rate, a portion
of my ten pounds. Now the distinguishing
feature of the modem co-operative production
system, depending for its eflBciency on the
principle of the division of labour, is that the
production of the individual is in itself of
decreasing use to him, as the sub-division of
labour and process is extended. A man who
works on a small farm, can live (at a very
low standard of comfort and civilisation) by
consuming the actual products of his own
industry. But a highly trained mechanic,
producing some one portion of an intricate
mechanism, can only live by casting his pro-
149

SOCIAL CREDIT

duct into the common stock, and drawing
from that common stock, a portion of the
combined product through the agency of
money.

There are some deductions of major im-
portance which can be made from these
premises. The first is that money is nothing
but an efiective demand. It is not wealth,
it is not production, and it has no inherent
and indissoluble connection with anything
whatever except efiective demand. That is
the first point, and it would be difficult to
over-rate the importance of a clear grasp of
it. It lies at the root of the question as to
the true ownership of credit-purchasing-power.
The second point is that, so far as we
can conceive, the co-operative industrial
system cannot exist withoxxt a satisfactory
form of efiective-demand system, and the
result of an unsatisfactory money system
(that is to say, a money system which fails
to function as efiective demand to the general
satisfaction) is that mankind will be driven
back to the distinguishing characteristic of
barbarism, which is individual production.

160

SOCIAL CREDIT

And the third point, and the point which
is perhaps of most immediate importance at
the present time, is that the control of the
money system means the control of civilised
humanity. In other words, so far from money,
or its equivalent, being a minor feature of
modern economics, it is the very keystone of
the structure.

Now, the amount of legal tender in Great
Britain amounts to roughly four hundred
millions sterling. That is to say about nine
pounds per head. If, on a given day every
description of effective demand, other than
legal tender, was effectively demonetized, a
number of interesting things would no doubt
happen, but amongst them would be this :
if this four himdred million pounds was to
function as effective demand for the whole of
the production of the country, the pxirchasing-
power of each single pound would have to
increase at the same rate as any increase in
the rate of production. That would mean
that prices would have to fall in proportion
as the rate of production rose, or shortly,
prices would be inversely proportional to the
161

SOCIAL CREDIT

rate of production. This statement is inde-
pendent of any questions in respect of the
ownership of the legal tender.

But supposing someone discovered a method
of increasing the legal or customary tender,
either by counterfeiting notes, or in any other
way ; then this process of increasing the
amount of legal or customary tender would
operate in the reverse direction to a process
of increasing the rate of production, and if
the increase in legal tender, while continuing
to function as effective demand, paralleled the
increase in productive rate, prices would
remain constant per unit of productivity,
assmning (what would not be true) that costs
did not rise in such a manner as to drive out
the willing seller.

We know of certain things in connection with
the productive system as matters of fact and
not of theory. We know that the productive
rate per man-hour has increased enormously,
in some cases as much as one hundred times
in comparison with the productive rate one
hundred and twenty-five years ago. We know
that prices over a period of years, not only
152

SOCIAL CREDIT

have not fallen, but that they are rising.
We know that there are many other forms
of efiective demand other than legal tender.
And it does not appear to require much
acumen to deduce that all these facts have
some relation to each other.

We have already seen that the result of a
loan by a bank is to increase the amount of
collective deposits on which the bank’s cus-
tomers can draw; which deposits, of course,
function as money. The repayment of these
loans destroys these deposits, and thus destroys
effective demand. This process of creating
purchasing-power by means of book entries
has, however, a further extension of far reach-
ing importance, which can perhaps be grasped
by a consideration of the methods by which
Great Britain financed the War of 1914-1919.

War is a consumer whose necessities are so
imperative that they become superior to all
questions of legal and financial restriction.
Inter arma silent leges. That is why legalists
and financiers, although their existing
systems tend inevitably to produce wars,
are so afraid of them, and why war, terrible
163

SOCIAL CKEDIT

in itself, has so often released humanity from
bonds which threaten to strangle it. As a
result of this situation, the bounds which are
placed upon production for war purposes are
defined by intrinsic forces and not by arti-
ficial limitations. That is to say, in order
to maintain a connection between finance and
production, finance has to follow production
instead of, as in the normal case, production
having to follow finance. The extension of
production to its utmost intrinsic limits,
therefore, involves an extension of finance
at a rate out of all proportion to that which
obtains in the normal course of events, and
this extension at once reveals the artificial
character of normal finance. It has been
pointed out at some length, and probably
sufficiently, that the Gold Standard, on which
British finance was supposed to be based,
broke down within a few hours of the out-
break of war. That is important; but it is
only the first step, just as the Gold Standard
itself is only one aspect of a system of finance
in which currency is the basis of credit. What
is more fundamentally important, is to
164

SOCIAL CREDIT

observe that immediately production is ex-
panded at anything like its possible rate, the
idea that the financial costs of that expansion
can be recovered in prices is seen in its full
absurdity.

It will be understood that by far the major
portion of the m unim ents of war (including
not only war-like weapons and munitions,
but the million articles required by the supply
services of the armies engaged) were produced
by so-called private imdertakings, and paid
for by the Government. Now, the normal
method by which a Government obtains the
money wherewith to pay for its purchases, is
by taxation, and a Balanced Budget means
that the proceeds from taxation at least cover
the expendittire on public services. Under
these conditions, costs and profits of pro-
duction are recovered by the Governments
(through the medium of taxation) in prices ;
that amount of taxation which is represented
by the supply services, representing the price
of the goods delivered to the Government
with all costs included.

The National Debt rose between August
166

SOCIAL CREDIT

1914 and December 1919 from about six
hundred and sixty millions sterling, to about
seven thousand seven hundred millions ster-
ling. And this rise represents, on the whole,
the expenditure over that period which it was
deemed impracticable to recover in current
taxation. That is to say, if we take the
average taxation for Supply purposes over
that period 1914-1918, as being about three
hundred millions per annum, the amount paid
by the public as consumer for the goods and
services supplied to it for war purposes, was
about thirteen hundred and fifty milhons, and
the financial cost of those goods and services
was about eight thousand, three himdred and
fifty millions, a ratio of cost to price of about
roughly 1 : 6.2. In other words, goods were
sold to the public at one sixth of their apparent
financial cost, and no-one lost any money over
it at the time. How was this done ?

A very considerable amoimt of this money
(some of which may be in excess of the figures
just mentioned), was created through what
are known as the Ways and Means Accounts,
and the working of this is described in the
156

SOCIAL CREDIT

first report of the Committee on Currency
and Foreign Exchanges, 1918, page two.
Paraphrased, the process may be shortly
explained as follows.

If ten million pounds credit, is advanced at
the Bank of England to the credit of Public
(t.e. State) Deposits (which simply involves
the writing up of the Public Deposits account
by this amount), this amount is paid out by
the Spending Departments to contractors in
payment for their services, and when the
cheques are cleared, passes to the credit of
the contractors’ bankers ^ Joint Stock Banks)
account with the Bank of England. The
Joint Stock Banks are accustomed to regard
their credits with the Bank of England as
cash at call and, therefore, ten million poimds
is credited to the depositor’s of the Joint
Stock Banks, and ten million pounds to the
Joint Stock Bank’s cash accoxmt.

As a result of this, the Joint Stock Banks,
working on a ratio of one to four between
so-called cash and short date liabilities, are
able to allow their customers (working on
Government contracts) overdrafts to the ex-
167

SOCIAL CREDIT

tent of forty millions, a portion of which,
their customers may devote to taking up
Treasury Bills or War Loans. The banks
themselves may take up about eight millions
of Treasury Bills or War Loan, out of their
additional “ deposit ” balances, or they may
lend about eight millions to the Bank of
England to lend to the Government. Event-
ually, the result is the same, namely that the
Government owes forty millions to the banks,
through the Bank of England.

Now the first point to notice is that the
result of this complicated process is exactly
the same as if the Government itself had pro-
vided forty millions, in Treasury Notes, with
the important exception that the public pays
four or five per cent, per annum on the forty
millions, instead of merely paying the cost of
printing the Treasury Notes. The effect on
prices, while the forty millions is outstanding,
is the same, and the contractors pay six or
seven per cent, for their overdrafts instead of
getting the use of the money, free. But if
the forty million is redeemed through taxation,
or a Capital Levy, the public pays not only
158

SOCIAL CREDIT

the five per cent, per annum, together
with the contractor’s six or seven per
cent., plus a profit on both of them, but
it pays the whole of the forty millions out
of money which has been received in respect
of wages, salaries, and dividends. So far as
I am aware, no one has ever suggested that
Treasury Notes should be retired by taxation.
It is perfectly true that when this forty millions
has been repaid, both the original debt and the
repayment cancel each other, and only the
interest charges go to the Profit and Loss
Account of the Bank. But since, as we have
seen, the repayment of Bank Loans means
the immobilisation of an equivalent amount
of price-values, this only means that a fresh
loan with fresh interest charges has to be
created. A consideration of these facts will
make it easy to understand the implacable
opposition of bankers and financiers to
Government Paper Money and their insistence
on the importance of what they term re-
demption. The payment in current taxation
of only one-sixth of the price of war-stores, etc.,
meant, therefore, that a credit-grant_of the other
159

SOCIAL CREDIT

five-sixths of the price was made to the Public.
The repayment of this credit is only justifiable
on the assumption that hanks own Public Credit.

The average banker, if confronted with the
foregoing statements would, while being obliged
to admit the facts, probably say, “ Yes, but
printing paper money has no finaUty. Once
you begin, you have to go on.” Without
admitting his contention, let us see what is
his alternative.

Since bank loans create bank deposits, it
will be seen without difficulty that the process
which has just been described would either
produce a fantastic array of depositor’s
accounts, or else would necessitate the calling
in of such large amounts of over-drafts, as
would make it impossible for the manufacturer
to carry on his business. It therefore became
necessary to fund these unwieldy sums. That
is to say, to convert them from something
which will operate as currency, into “ Capital
Securities,” the interest only of which will
operate as currency ; and it will still be fresh
in the memory, that every inducement, in-
cluding loans up to eighty per cent, of the
160

SOCIAL CREDIT

face-value, was ofiered by the banks to their
depositors, to convert such deposits into
Government Stocks of various descriptions.
The result of this was to convert a large
portion of their unsecured overdrafts into loans
against Government security. Observe what
happened. The Government loans, eighty per
cent, of the value of which originally repre-
sented nothing but bank overdrafts created
by a stroke of the pen, were held by the banks
as security for this same overdraft. At the
close of the War, or rather about a year after
the close of the War, the banks began to call
in these overdrafts. Had they called in the
whole of them, there would have been no
money in the country except the four hundred
millions of legal tender, most of it, already
in the banks. As a consequence of the
partial extinction of existing credits, and the
reduction in the rate of issue of new credits,
Government Stocks of all descriptions were
thrown upon the market, to obtain money
wherewith to meet the bankers’ calls. Their
value declined until the margin of their market
price over the amount which had been lent
161 M

SOCIAL CREDIT

upon them had disappeared, and as a result,
the stocks came into the hand of the banks ;
so that it is probably true to say that ninety
per cent, of the holdings of Government War
Securities were under the ownership or com-
plete lien of the banks and financial houses
by about the middle of 1922. From this
time on, a process of re-selling these stocks
to the public at enhanced prices began,
fostered by the stagnation of trade, which
forced any available money in the coimtry
into fixed interest-bearing securities. Owing
to the comparatively small amount of money
available for this purpose, and the fact that a
large amount of Government Stock was
acquired by the direct creation of bank credits
on bank account, it is probable that even yet
probably 76 per cent, of the total issue of
Government Securities is still in the hands
of the banks,* or is held by them under a
lien ; sufficient only being in individual hands
to ensiire the protection of the loan as a whole.

* As this volume goes to Press, the absorption of the Gaemsej
Bank by the National Provincial Bank is announced. For each
£10 paid share of the Guernsey Bank two £5 National Provincial
shares and £18 in 5 peresfU. fFar Loan is given.

162

SOCIAL CREDIT

A Capital Levy, therefore, would simply be
a levy of which 75 per cent, would go directly
to banks and financial houses. The net result
of the process, is that the public pays the sum
of three hundred and twenty-six millions
sterling per annum as interest on an immobil-
ised loan of which it has not the use as money,
but which it has to repay in the form of sinking
fund. Such sinking fund can of course either
be collected out of the costs distributed in
respect of futme production, the public being
thus further prevented from purchasing home-
produced goods, or it can be looted from them
by such methods as the Capital Levy.

The beauty of the transaction, however, is
only seen in its entirety when it is recognised
that the repayment of the loan, either by
taxation or Capital Levy, unlike the repay-
ment of the costless book-credit which orig-
mally created it, does not mean its extinction,
but merely its re-transformation into the form
of purchasing-power, since the sinking fund
represents a cash payment to the holders of
the loan in return for their securities. The
public will therefore pay the Levy or interest
163

SOCIAL CREDIT

and sinking-fund for the term of the loans
in order to get back the use of their money —
and as the Banks would be likely to hold
most of the loan, the latter would get the
money. In the third part of this book it will
be necessary to consider the question of the
beneficial ownership of financial credit ; and
a grasp of the results of the present method
of operating the credit system as indicated by
the financial operations of the past few years,
is necessary for that purpose.

It may be asked why banks only pay a
dividend of 26 per cent, or so. The answer
is simple.

Their real earnings are measured by the
control over industry which they acquire —
earnings so rapid that in a few years the
control will be absolute, if not checked. The
amount distributed in dividends is, or could
be, any desired dividend on this capital control.

104

CHAI>XEI^ VX

CHAPTER VI.

In a remarkable document which received
some publicity a year or two ago, under the
the title of “ The Protocols of the Learned
Elders of Zion,” a Machiavellian scheme for
the enslavement of the world was outlined.
The authenticity of this document is a matter
of very little importance ; what is undoubtedly
interesting about it, is the fidelity with which
the methods by which such enslavement
might be brought about can be seen reflected
in the facts of every day experience.

It was explained in that treatise that the
financial system was the agency most suitable
for such a purpose ; the inculcation of a false
democracy was recommended ; vindictive
penalties for infringement of Laws were
advised ; the Great War and the methods by
which it might be brought about were pre-
dicted at least twenty years before the event ;
the imposition of grinding taxation, more
166

SOCIAL CREDIT

especially directed against Real Estate owners,
was specifically explained as essential to the
furtherance of the scheme. The methods by
which the spurious democratic machinery,
and the journalistic organs of “ Public ”
opinion could be enlisted on the side of such
taxation, and an antagonism between the
interests of the town and the interests of the
country could be created, were explained
with an accuracy of detail which can only be
described as Satanic.

It is quite possible that this documenjb is
inductive rather than deductive in origin,
that is to say, that some person of great but
perverted talents, with a siifficient grasp of
the existing social mechanism, saw, and ex-
ploited the automatic results of it. If that
be the case, the world owes a debt of gratitude
to that mysterious author. He was sub-
stantially accurate in his generalised facts,
and the inductive prophecies from them are
moving rapidly towards fulfilment.

Making all due allowances for the defects in
it which are only too obvious, the Anglo-
Saxon character probably remains the greatest

167

SOCIAL CREDIT

bulwark against tyranny that exists in the
world to-day. That is a thesis on which a
lai^e number of volumes have been written,
and it does not seem necessary to expand it
further. But if it be granted, it will be agreed
that any attempt, either conscious or uncon-
scious, to establish an effective hegemony over
the whole of the world would be likely to con-
centrate on such methods as would paralyse
the Anglo-Saxon.

Now, the British population, men, women
and children, are at the present time (1923)
taxed to the figure of twenty-five pounds
seven shillings per head (or about one himdred
and twelve poimds per family), which is more
than twice the taxation per head of any other
country in the world. Large estates are
subject to succession and legacy duties which
make it impossible for them to remain in
private hands, and force them into the market
in which they are acquired by corporations
having access to the methods of creating
financial credit. These two forms of taxation
are concurrent, i.e., the enormous Capital
Levy imposed by Succession and Legacy

168

SOCIAL CREDIT

Duties, so far from reducing general taxation,
has been accompanied by a steady rise in such
taxation. In the United States the estimated
value of all real and personal property (1923)
is two hundred thousand million dollars.
The bonded debt, public and private, payable
in gold is one hundred and twenty thousand
million dollars, and it is estimated that the
total time for interest and taxation to reach
such proportions as will require the whole
equity value of the United States to be mort-
gaged to meet it, is about twenty years. It
is perhaps hardly necessary to mention that
the bonded debt of the United States is held
by very much the same class of financial
organisation as that which is the chief owner
of the bonded debt of Great Britain. The
banks and financial houses are our creditors ;
and Capital Levies in reduction of debt are
merely levies for the benefit of these institu-
tions and enhance the attractions of the
country paying them, as debt-contractors.

The portion of this taxation which is repre-
sented by interest on public debts, created
more or less in the manner outlined in the

169

SOCIAL CREDIT

previous chapter, is onerous in proportion
as its destination is centralised. It is easy
enough to see that it would not matter very
much if the Debt of Great Britain were ten
times what it is, even though the service or
payment of that Debt were made on “ ortho-
dox ” principles if the ownership of the Debt
was uniformly distributed over the tax-paying
population. One hundred and twenty-five
pounds per annum per head would be collected
in taxes, and (disregarding the cost of
administration) the one hundred and twenty-
five pounds per annum would be distributed
as dividends. The operation would, in fact,
be meaningless, from which observation we
may deduce the interesting fact that present
day finance and taxation is merely an in-
genious system for concentrating financial
power. No proposal to re-distribute the
National Debt has ever received the slightest
encouragement from Socialist leaders.

Now at first sight this would appear to lend
colour to the simple Labour-Socialist idea that
many men are poor, because a few are rich.
Post hoc, ergo yropter hoc. But once again,

170

SOCIAL CREDIT

the matter is not quite so simple. It is per-
fectly true that a few men do become very
rich by this process, and very many more
have hopes of riches ; that is how their co-
operation is secured. But it is also equally
true that their collective riches, in visible
form, would represent a very small sum if
equally distributed amongst the general
population. The main tendency of the process
is to concentrate the control of credit in a
potential form in great organisations, and
notably in the hands of the great banks.

It is well worthy of notice that the proposal
for a Capital Levy, which is one of the main
planks in the programme of the British Labour-
Socialist Party, is for a levy on Mividmh,
not on corporations or businesses.

Apart from any more subtle explanation,
even great banks hesitate to distribute their
true profits for fear of attracting too much
attention. It is an interesting and symbolical
fact that every comer site, whether in town
or village, sooner or later, falls into the hands
of a bank. Comer sites are potential key
positions. It may be stressing the theory a
171

SOCIAL CREDIT

little too far, to use it as an explanation of
the fact that a recently built bank in Cleve-
land, U.S.A., has been designed with bomb-
proof walls, and has machine guns mounted
at each comer of it. A polite intimation that
his overdraft must be reduced, is a more
effective argument to the average man than
a threat by a machine gun. But the idea
is no doubt not dissimilar.

An organisation can only grow powerful at
the expense of those involved in it, just as
a tree can only grow at the expense of its
soil. Corner sites, granite and marble build-
ings, to name only two of the more tangible
signs of growth in the banking organisation,
represent imdistributed profits. Undistri-
buted profits are simply cancelled credits ;
they are “ savings ” by an institution. They
are credits transformed from a visible form
represented by deposits, into a potential form
such as, for instance, the security for loans
or mortgages. Every credit cancelled in this
way, whatever form the cancellation may
take, simply represents so much purchasing-
power destroyed without the destmction to

172

SOCIAL CREDIT

an equivalent amount in book price values,
and, the effect of it is that its equivalent
amount in goods-values cannot be bought in
one and the same credit area. It will be
seen, therefore, that this concentration of
securities in the hands of large organisations
is a matter of much greater importance, than
if even the same concentration took place
in the hands of individuals who, in one way
or another, disbursed the large sums thus
received, since the disbursements would, in
the nature of things, be spread over a very
wide field of activity. But a functional
organisation like a bank is only interested in
consolidating the power and importance of
banking, and uses the credit power that
it obtains with the single aim of fostering
this result. That is why we are building
branch banks and other industrial buildings,
instead of houses, and why such houses as
are built are mostly cheap and nasty. There
is not much granite and marble about the
average post-war bungalow or cottage.

But however that may be, one result of the
process is indisputable. It still further

173

SOCIAL CEEDIT

restricts the money and purchasing-power at
the disposal of individuals, and concentrates
this money power in financial institutions.
If the process is allowed to proceed without
interruption, and it remains true that the
possession of money is the only claim to the
necessaries of life, then it is not difficult to
see that within a very short space of time,
that condition of universal slavery to which
the writer of “ The Protocols of Zion ” looked
forward with such exultation, will be an
accomplished fact.

The concentration of control over business
firms, which is the inevitable accompaniment
of the increasing dependence of the business
world upon banking accommodation, is
paralleled by the rapid elimination of a class
of any considerable dimensions which can
maintain its customary standard of life with-
out commercial employment. Both com-
mercial employer and commercial employed
are therefore rapidly coming under an invisible
control which is not subject to any criticism
of its actions in respect to the giving or with-
holding of this “ employment ” without which

174

SOCIAL CREDIT

civilised existence is becoming impossible.
The obsolete system of chattel slavery had the
vital defect that the slave could not fail to
be conscious of his slavery, and consequently
required guarding. But the more insidious
subjection with which we are threatened,
promises a condition of affairs in which servi-
tude will only be granted as a privilege, and
starvation following on degradation will be
the alternative.

176

CHAPTER VH.

CHAPTER VII.

Taking into consideration the fact that all
business is at present carried on with the
express purpose of “ making money,” it might
be imagined that even if the details of the money
system were not matters of general knowledge,
at any rate there would be very little room left
for discussion in regard to its main principles.
But there is not even elementary consistency
and agreement on the subject. One of the
more obvious examples of this is the confusion
which is in evidence in regard to matters of
foreign exchange, and War Reparations.

It will be remembered that we are constantly
being told that Great Britain, in particular, lives
on exports of goods and services. In orthodox
circles there is never any discussion in regard
to this statement. It is regarded as axiomatic.
It is how we become “rich.” On the other
hand, as a result of the determination to inflict
178

SOCIAL CREDIT

punishment of all descriptions upon Germany
for her crime of losing the war, and to reward
other countries for their virtue in winning it,
severe economic penalties were imposed by the
Treaty of Versailles. These penalties were
assessed principally in terms of currency. It
is common knowledge that these penalties,
generally referred to as reparations, have not
so far been successfully inflicted. Germany has
herself expressed her willingness to pay; France
in particular amongst her opponents has
expressed her determination to make Germany
pay. Germany has printed large quantities of
paper money and has also incidentally greatly
expanded her economic ability to produce, and
thus, it might be imagined, to pay, but the
payment has not taken place. The reason for
this is quite simple, and has been explained in
many perfectly orthodox quarters. Such pay-
ment can only take place by the export of
German goods and services in return for a
pledging of German credit based on the ability
to deliver these goods and services. Notice the
grim humour of the situation. At one and the
same time and from one and the same source, it
179

SOCIAL CREDIT

is being stated that Great Britain can only
become rich by exporting goods and services.
Germany, however, can only be penalised and
presumably become poorer by exporting goods
and services. A science of finance and eco-
nomics which will permit absurdities of this
description to pass almost unnoticed, can
hardly fail to produce chaos in the world.
The country on which the “ penalty ” of
reparations was inflicted is straining every
nerve and sinew, not merely to export an
amount equivalent to the money figure attached
to the reparations, but to add to this amoimt
be every means in her power. Great Britain,
which was one of the nations very vocal in
asserting that Germany must pay, is feverishly
searching for methods either by tariffs or
otherwise, which will prevent German goods,
which are by common consent the only method
by which Germany can pay, from entering this
country, and is providing Germany with credits
— ^in order that she may import British coal.

There must be in every country, a sufficient,
if small, minority of persons who see these
absurdities and imderstand that they proceed,
180

SOCIAL CREDIT

and can only proceed, from a radically defective
or obsolete financial system. It can only be
assumed that the silence of such persons is
either dictated by fear of the results of a
general exposure, or by complicity in the
policy which is furthered by the existing
situation.

Considered merely from the point of view of
financial operations, and without trespassing on
the domain of world policy, it is not difficult
to see that every advantage to finance, as a
business, lies in rendering the Reparations
Clauses of the Treaty of Versailles ineffective.
To a financier a country is simply something on
which to base a mortgage. Just as a private
estate which is not mortgaged is, to a money-
lender, an excrescence on the landscape, so a
country whose National Debt is not as large as
is consistent with security is an object of
solicitude to International Finance. If Ger-
many’s productive capacity for the next twenty
years or so were effectively hypothecated to
the service of the allies who were engaged
against her in the late war, it is fairly obvious
that she would not be good security for loans.

181

SOCIAL CREDIT

For this reason, if for no other, the efforts
of the financial interests are likely to be directed
to obstructing the payment of reparations, and
finally to the cancellation of the obligation to
pay them-v-a state of affairs which in the
existing financial arrangements would no doubt
be signalised by the grant of an “ international ”
loan to Germany for a reconstruction of which,
by all accounts, she is in no need.

If this line of argument be accepted, it will
no doubt occur to the reader that the insis-
tence by the United States on the payment of
the British Debt to America would seem to
furnish a contradiction. It must be remem-
bered, however, that it was necessary for some-
one to pay war debts, or the repayment of
Financial Debt would be gravely discredited,
and that the U.S. Government has so hedged
round the repayment of the sums borrowed as
to make the British Debt merely a political
weapon for the control of British policy.
Further, it is to be remembered that the
financial system is a centralising system; it
can only have one logical end, and that is a
world dictatorship. There seems to be very
182

SOCIAL CREDIT

little doubt that the temporary headquarters
of this potential world dictatorship have been
moved from country to country several times
during the past five or six centuries. At one
time it was in Italy and specifically in Genoa,
then in the Low Countries and Lombardy,
from whence came the Jewish Lombards who
gave their name to Lombard Street. During
the eighteenth and nineteenth centuries it has
unquestionably been in London, but there is
every indication that a change of headquarters
to New York is contemplated. The financial
and economic crippling of Great Britain, which,
under existing methods of finance, would be
the result of the payment of a sum of
£1,300,000,000, carried out by the process of
purchasing American dollars or State Securities
and cancelling them, would be a logical and
necessary step to what is hoped will be the
establishment of a final and indisputable
Regency of the world.

We may therefore expect to see a greater
diplomacy in operation, having as its objective
the psychological, political and military isola-
ti<m of Great Britain contemporaneously with
183

SOCIAL CKEDIT

the economic and industrial emasculation
which is at present proceeding. By forcing a
policy of deflation on Great Britain, while at
the same time pursuing a policy of inflation,
the powers operating through the United
States Political and Financial Government
have, during the years 1918-1924, succeeded in
destrojung, to a very considerable extent, the
immense increase in productive and fighting
power which existed at the time of the Armis-
tice. A continuous drain of the most skilled
mechanics from this country to America has
been the result of the immense disparity
between the wages paid in the two countries
during the same period of time. No pressure
has been applied from Washington or Wall
Street to secure a repayment of the indebted-
ness of any country other than Great Britain ;
and, as a result, the onus of un|»opularity has
shifted to London in view of the impossibility
of meeting American indebtedness without
collecting the sums due from Continental
countries.

In short, it is impossible to doubt that the
bid for world control, which emerged into the
184

SOCIAL CREDIT

open in 1914, and was temporarily foiled in
1918, has merely shifted from Berlin to Wash-
ington and New York, and that the apparently
better relations which exist between this
country and America can only be attributed to
a decision that effective resistance to the fresh
attempt is for the moment impossible. The
promptness with which any suggestion of
departure from the imposed financial and fiscal
policy has been followed by a severe fall in the
sterling exchange on New York is, I think,
sufficient evidence that the somewhat con-
temptuous friendliness which subsists in regard
to Anglo-American relations at the present
time can, and will be, replaced by unrelenting
severity at any moment that British policy
appears to run contrary to that of her creditors.

Just as, in the main, the mass of Germans
were merely passive tools in the policy which
resulted in the first Great European War, so it
is no doubt true that the American people, as
individuals, would repudiate personal com-
plicity in any similar plans. If it is true, as
seems probable, that effective resistance to an
imposed group policy is nearly impossible so
185

SOCIAL CREDIT

long as the group has control of the credit of
the individuals composing it, it is beside the
point to pay serious attention to such a factor.
The only line of action which can be effective
in the emergency with which the world is
confronted must be one which can paralyse or
break up the group control of credit to which
the majority of individuals in every country
have become helpless slaves ; and it is not
without interest that the antagonism between
the American people and the United States
Government is crystallising into an attack on
the mutual support given to each other by the
interests symbolised by Wall Street and Wash-
ington.

186

PART III.

THE DESIGN OF ECONOMIC FREEDOM

CHAPTER 1.

“ In Europe we know that an age is dying. Here in
America it would be easy to miss the signs of coming
change, but I have little doubt that it will come. A
realisation of the aimlessness of life lived to labour and
to die, having achieved nothing but avoided starvation,
and of the birth of children, also doomed to the weary
treadmill, had seized the minds of millions.*' — Sir Auck-
land Gbddbs.

CHAPTER I.

In considering the design, either of a mechanism
or of an undertaking, it is first of all necessary
to have a specific and well-defined objective,
and, after that, a knowledge not only of the
methods by which that objective can be
obtained, but also of the nature and treatment
of the forces which will be involved, the
materials available, and their reaction to those
forces.

The decision of objectives is the domain of
policy. The decision of methods is technics,
and the carrying out of those methods is
technique. With the latter two the general
public can have nothing to do, and therefore
the submission of detailed schemes to the
consideration of the public is a mistake where
it is possible to avoid that course. It is a
sound proceeding to submit a proposal to make
a railway between A and B to the public as
188

SOCIAL CREDIT

such ; but to submit the engiueering details of
construction to the same general criticism
would be absurd.

We have seen in the preceding pages that
there is a definite policy in operation in the
world at the present time, and that policy is
being supported from sources which seem
superficially antagonistic. This policy, for
want of a better term, can be described as the
“ Moral ” or Classical policy ; its mechanism
is the mechanism of rewards and punishments ;
and its inevitable corollary is limitation —
inhibition.

Denunciation of this policy in the abstract
is beside the point ; while very natural, it is an
attitude of mind not very dangerous to the
system criticised. The point on which it is
necessary to concentrate is that, whether or not
this system has been the best method by which
humanity could be brought to the point which
it has now reached, a state of affairs has arisen
out of it which is not merely intolerable in the
abstract, but which in fact the modem man
and woman will not tolerate. A policy which
the majority of individuals concerned will not
189

SOCIAL CREDIT

tolerate is a bad policy from a practical point
of view. If it be objected that there is, in
fact, no other policy operative in the world
to-day, the only short answer which can be
made is, “ Look at the world to-day.”

The classical ideal is an imposed ideal. It is
authoritarian. However hopeless at the
moment may seem the alternative, there wiU,
I believe, be nothing but strife and distress in
the world xmtil an imposed policy is replaced
by an agreed policy.

It has already been suggested that the chief
aim of persons who may be regarded as
executives of the Classical Policy is to avoid as
far as possible any discussion whatever on the
policy itself and to direct public attention to a
profitless wrangle in regard to methods. In
Great Britain, Conservatives advocate the
raising prices by means of tariffe ; Liberals
advocate the lowering of purchasing-power by
means of increased Death Duties and Insurance
Schemes ; Labour, the strangulation of in-
dividual initiative by means of nationalisation
or a Capital Levy. The choice offered to the
free and enlightened elector is between being
190

SOCIAL CREDIT

hanged, boiled in oil, or being shot. In the
United States every effort is made to rivet the
attention of the public on tariffs or Prohibition,
while prices rise with increasing velocity, and
the mortgagee grips the land with ever greater
tenacity.

In this world it is action which counts. The
only sense in which the phrase “ Right is
stronger than Might ” is anything but pernicious
nonsense is that, in the last event, might
depends on the actions of individuals, and if it
is possible to affect the actions of indi%uduals
by something which we call “ Right,” “ Might ”
and “ Right ” may eventually be foimd on the
same side.

Now, we never get mass action out of al-
truism. Altruism is an occasional character-
istic of individuals, never of mobs. It is part
of the miasma of propaganda with which the
world is flooded at the present time to pretend
that such mass action as the entrance of Great
Britain or America or France or any other
nation into the Great War proceeded from
altruistic motives. It is perhaps hardly
necessary to stress the point that this was not
191

SOCIAL CREDIT

so, but it is not without practical use to con-
sider the methods by which mass action was
attained.

Passing over the causes which induced, for
instance. Great Britain as a Nation to declare
war against Germany, because very few persons
would accuse Nations of altruism, the first
result of that declaration was an order to
Regular Troops to proceed overseas. No al-
truism entered into the obedience to this order ;
mutiny would have been punishable by death.
It is not unfair to say that the original means
by which this Regular Eorce was enrolled was
by the offer of a stable economic future, com-
bined with an interesting career.

Subsequent to the departure of the regular
army, volunteers were called for. Amongst
these volunteers were most unquestionably
numbers of people actuated by great devotion
to patriotic ideals. But it would be erroneous
and misleading to say that these were in
anything but a small minority. Love of
excitement, pressiire of public opinion, hopes
of glory and advancement, fear of invasion,
and by no means least, the very attractive
192

SOCIAL CREDIT

financial terms which were offered, all played
their part. The Derby Scheme was a remark-
able example of enlisting a majority to coerce
successive minorities. When finally these failed,
the residue, by this time reduced to impotence,
were compelled by conscription and by stark
threats of punishment to join those who had
been captured by more ingenious methods.

There is an exact parallel to this method of
procedure in the proposal put forward by the
Labour Party for a Capital Levy on fortunes
over £ 5 , 000 . The minority is first penalised ;
and the majority is subsequently to be enslaved
in successive batches.

As a result of the consideration of the care
with which the financial and legal organisation
of the world has been perfected and has
entrenched itself, it seems difiicult to avoid the
conclusion that when the milder methods, and
the ability to manipulate public opinion, no
longer function, the mask will be thrown aside
and stark compulsion will be ruthlessly invoked.
That is already happening in portions of the
Middle West of America, where strikes are
indistinguishable from minor military engage-
193 0

SOCIAL CREDIT

meuts ; and much the same phenomena are
observable in Germany. The “ castor oil ”
methods of the Italian Fascisti are of course
similar. The British Govemm^it representa-
tive on the Board of our only aeroplane com-
pany is, by a curious coincidence, the President
of the Bankers’ Institute. All this is important
in considering the emphasis to be laid upon
such questions as whether the attainment of
reform by political, that is to say, Parliamentary
methods, or whether some variant of the
“ Direct Action ” principle is the only possible
path to effective change. There need be very
little doubt that the forces of the State could
all be applied to enforce a Capital Levy or the
nationalisation of Mines. Would those forces
function to enforce a modification of the powers
of banks and the methods by which the credit
system is operated ? The derisory results
obtained in regard to the very modest efforts
to interfere with the price system during
1917-18 lead one to doubt it.

Assuming for the moment, however, the
comforting assumption that the will of the
people, as expressed by their votes, must

194

SOCIAL CREDIT

prevail, there is no doubt that the defeat of
the power of political caucuses to draw up the
agenda of an election is the immediate objective.
The exact method by which to attain this end
is immaterial so long as it is attained. The
invalidation of an election, if less than say
fifty per cent, of the electorate voted on the
issues submitted to them, would no doubt be
as good a method as any other. The recogni-
tion of the danger to the Hidden Government
which is contained in some such procedure is
no doubt responsible for the proposal (and in
certain areas, the Law) making it a penal
offence to abstain from voting.

It would then be necessary to obtain a
straight vote on major questions of policy.
This does not seem to present insuperable
obstacles. There seems to be no fundamental
reason why an election should not be held on
an issue as “ Do you want employment, or do
you want goods ? ” From this point, however,
progress would appear difficult. The power of
appointing members of committees — in short,
the power of patronage — ^is a jealously guarded
asset. Short of holding an almost interminable
195

SOCIAL CREDIT

series of elections, both on personnel and terms
of reference, it is difficult to see how any
effective check could be exercised over a
determined and organised obstruction and
misdirection of public attention such as is
certain to be exercised by the interests attacked.

This superficial examination of the situation
may be sufficient to indicate the unsuitability
of Parliamentary machinery as an agency with
which to deal with the issues involved. Let us,
therefore, return to the springs of action in
individuals. There is, doubtless, a certain
small number of individuals whose interests
are indissolubly wedded to the present economic
and social system. The essence of their attach-
ment to it is the fact that it places them in
positions of enormous, if frequently hidden,
power, and this power, far more than any
material reward, is the object of their concern.
These individuals are not amenable to any
argument other than force majeure.

Now it is quite incontestable that the power
of money is by far the greatest power which is
wielded by this small minority of persons.
The power to reward and punish, which is the
196

SOCIAL CREDIT

power that they prize, is almost solely due to
the fact that most people in the world want
money, and most people in the world cannot
get it, except eventually by the acquiescence
of those in executive control of the Financial
System, By this power of money, this small
minority can obtain the assistance of the
majority, and thus retain the determinant of
force.

Taking the situation as a whole, therefore, it
seems indisputable that sooner or later this
monopoly of money power has to be attacked ;
that for reasons already explained, it is not
being attacked now, and that taxation, so far
from attacking it, enormously strengthens and
consolidates its power ; that until it is attacked,
and successfully attacked, it can, by bribes
under various disguises, always retain a
majority. By the aid of this majority it can
defeat an antagonistic minority, qmte irrespec-
tive of whether that minority is “ right ” or
otherwise, and the only method by which the
minority can ensure that right is might, is by
obtaining the control of those inducements
which do, in fact, ensure mass action. This
197

90C1AL CREDIT

means, I think, that if we regard the distribution
of money power to all individuals, in opposition
in the present tendency to concentrate it in
group-organisations, as the first aim of economic
freedom, we are driven to a somewhat hack-
neyed conclusion — that the means and the end
are in this case identical. We can only defeat
money power with money power.

198

CTTA3?TErt TI.

CHAPTER II.

“ Nowhere do conservative notions consider
themselves more in place than in currency ;
yet nowhere is the need of innovation more
urgent. One is often warned that a scientific
treatment of currency questions is impossible
because the banking world is intellectually
incapable of understanding its own problems.
If this is true, the order of Society, which they
stand for, will decay. But I do not believe it.
What we have lacked is a clear analysis of the
real facts, rather than ability to understand an
analysis already given. If the new ideas, now
developing in many quarters, are sound and
right, I do not doubt that sooner or later they
will prevail.” — ^J. M. Keynes, C.B., October
1923 .

If we clear away from our minds all the
overgrowth with which our conception of the
industrial system is obscured, one fact seems to
200

SOCIAL CREDIT

emerge clearly. The primary inducement by
which the co-operation of the great majority of
persons is obtained is through the necessity of
“ getting a living.” That is to say, the first
policy of an industrial system which would
obtain the unhesitating acquiescence of the
majority, is that it should deliver the goods and
services that they require with the minimum
amount of trouble to everybody. Not only is
it indisputable that the industrial system does
not do this at the present time, but it is not
even publicly contended that this is its object.
As a system, it is only considered to be open to
criticism when it fails to provide full employ-
ment for every one.

So far as the generally accepted methods of
democracy are adaptable to the situation, there
is no shadow of doubt that the first and most
important task of the majority is to vote on
this single issue. And the first task for any
executive, genuinely empowered by the
majority to serve its best interests, is to devise
means by which the desires of the majority
can be given effective embodiment.

At this point it is valuable to recognise the
201

SOCIAL CREDI'^

parallelism which exists between the attributes
of a political majority, on the one hand, and
the economic consumer, and the political
minority, on the other hand, and the economic
producer. Just as a political majority is
likely to be right on a matter which truly
comes within the domain of policy, but is very
probably wrong in its ideas as to how that
policy can be made effective, so, conversely, it
is undoubtedly true that the industrial
technician (the “ intelligent minority ”) is very
apt to hold distorted views on the objective of
the producing process in which he is so keenly
interested ; while being unquestionably the
right and proper person to decide on the
technique to be applied to a given programme
of production. The parallelism extends with
sufficient completeness to the proper ralation*
ship between the consumer (the “ majority ”)
and the programme of production, the con-
sumer being only legitimately interested in
results.

It is also vital to notice that, so far from
tliese relationships being in any sense theo-
retical, they are so automatic and inherent
202

SOCIAL CREDIT

that they exist in a very definite form in the
world to-day. In spite of all the agitation
for what has been called workers’ control of
industry (an agitation which has been pressed
forward in every part of the world) such a
thing has never for one single moment been
in effective operation, for the simple reason
that it is wholly against the nature of things.
Finance directs, and always has directed the
programme of production. Finance is the
technique of credit; and the origin of credit
(though not the whole basis of credit) is the
consumer. “ Workers’ Committees,” Soviets,
and so forth, are mere crude credit-distribution
societies, whose working is immeasurably in-
ferior as such to that of the orthodox Bank.
It is possible to remove every factor from the
industrial system, except effective demand, and
some sort of industrial system, however
primitive in kind (even to the extent of digging
for roots and climbing for fruit) will remain ;
but take away the desire, the need or the
belief in the ability to consume, and not a seed
will be planted nor a tool employed. It is not
for lack of technical ability, but for lack of
208

SOCIAL CREDIT

effective demand, that civilisation to-day stands
on the brink of irremediable catastrophe.

There is, therefore, no room for doctrinaire
theorising in regard to the “ aims of industry ” ;
the trouble about industry is not that its aims
are wrong but that it fails to achieve them.
And it fails to achieve them for one simple
reason — the individual is divorced from the
credit which is his, and, in consequence, does
not duly function as a consumer. It is only
necessary to recognise the natural relationships
which underlie any sort of functioning of an
economic society. If we recognise and admit
these relationships, and make our arrangements
accordingly, we have a machine which is
designed to work in accordance with the only
forces which are available to work economic
machines, and the result is smoothness and
efiGiciency. If we refuse to recognise these
forces, or pretend that they have a direction
which is contrary to the facts, or clamour for
a change in their nature (a “ change of heart ”),
we are likely to get an economic machine which
is about as successful as would be a plough if
installed for the purpose of driving an Atlantic
304

SOCIAL CREDIT

liner. We are in the position of a would-be
engineer who refuses to accept the principles of
thermo-dynamics, and, instead of endeavouring
to improve the steam engine, tries to alter the
properties of steam.

The financial relationships which correspond
to these principles are fundamentally simple.
The credit power which is based on the demand
of the community as a whole for goods and
services can only be effectively directed in
detail by trained technicians, using that
description, in the words of the Labour Party,
“ to include workers by hand and brain.” But
just as it is in the nature of things that owner-
ship and finance are indissoluble, so, while
emphasising the sphere of the technician in
production, it is equally certain that his
jiroduct belongs not to himself, but to the
community from which he derives his financial
energy. It is the business of the scientists, the
designer, and the inventor, to place before the
individuals who compose the public the achieve-
ments which are considered possible. It is the
business of the public to say in what quantity
and in what priority it considers those achieve-
205

SOCIAL CREDIT

ments desirable, and it is the business of the
producer, in the general sense of the term, to
act in accordance with the verdict, and to hand
over the product to the general public — the
consumer — of whom alike the producer and the
inventor are a part. That is practically what
happens at present, with the vital exception
that the order system which connects the
individual with the producer does not function ;
whether by accident or design is largely
immaterial.

One method by which it is possible to visualise
in a familiar form the embodiment of such a set
of relationships is in the conception of, let us
say, Great Britain, Limited. If we imagine a
country to be organised in such a way that the
whole of its natural born inhabitants are
interested in it in their capacity as shareholders,
holding the ordinary stock, which is inalienable
and unsaleable, and such ordinary stock carries
with it a dividend which collectively will
purchase the whole of its products in excess of
those required for the maintenance of the
“ producing ” population, and whose apprecia-
tion in capital value (or dividend-earning

2oe

SOCIAL CKEDIT

capacity) is a direct function of the appreciation
in the real credit of the community, we have
a model, though not necessarily a very detailed
model, of the relationships outlined. Under
such conditions every individual would be
possessed of purchasing-power which would be
the reflection of his position as a “ tenant-for-
life ” of the benefits of the cultural heritage
handed down from generation to generation.
Every individual would be vitally interested
in that heritage, and his clear interest would be
to preserve and to enhance it. Con-
temporaneously with this, he might also be a
“ producer,” and although it is very probable
that the money incentive in the form of wages
could be made small in comparison with the
dividends he would receive as a shareholder, the
relation between these two forms of effective
demand offers a perfectly flexible method of
transition from the existing arrangements. It
will be obvious that such a set of relationships
does not impinge on what is commonly called
the rights of property at all, so long as these
rights are “consumers’” rights. It renders
each individual immune from economic penalisa*
207

SOCIAL CREDIT

tion for his personal views, and thus forms the
only effective bulwark against tyranny, and
it places the imderlying facts of co-operative
production in a light in which they can be
seen and grasped by the most modest intelli-
gence. Under such an arrangement, wages and
salaries become what they are in fact at
present — ^merely a credit grant against future
production, and a measure of the human energy
put into production. This credit grant would
be cancelled by the writing down of the national
assets to an extent represented by the sum
of wages and salaries, the assumption being,
orcourse, that the wages and salaries represent
the consumption of goods over a given period
which have to be debited against the production
of the same period. The dividend which is
declared over the equivalent period represents
the division of the difference between actual
consumption and actual production (both of
actual products and production capacity) over
the same period.

If P = Production in any unit, C = Con-
sumption in the same unit, and t = time, the
volume of Production in terms of the chosen
208

SOCIAL CREDIT

unit is <(P — C), and using the same symbols,
the “ slope ” of production is

pdP _

^dt dt

C*

If now we make Consumption itself the
absolute unit in which we are measuring, we
obtain as the rate of Production

Rate of Production “ C ^ - R ^

Now the Cost of Production is Consumption,
therefore the absolute unit of Production is
Consumption, therefore the true form of the
Production curve is given by the above
formula.

If now, instead of making P = Production,
we make it == Direct Cost in financial miits of
Production, and C = Price of financial units
of Production, and assume that all Costs
(including profits) must be recovered in Prices ;

209 P

SOCIAL CREDIT

and that no fresh money or credit is used, we
then arrive at the condition that,

dt dt

That is to say, that so long as we maintain
a rigid relation between the financial units
which go into the direct (wages and salaries)
Cost of Production, and the financial units
which are recovered in the price charged for
Production, we maintain a rigid general level
of Consumption, and any Production which
takes place in excess of this, must be disposed
of in some manner which does not involve that
the purchasing-power of it shall be represented
by costs issued in respect of the same goods.
And if we include in prices any sums (such as
overhead charges) which make the cdlective
price of a week’s sales represent less goods than
are produced by the same sum expended in
wages and salaries for the same week, then the
balance of these goods will remain unsold at
home.

But if we, on the contrary, say that the
210

SOCIAL CREDIT

rigid relation which must be maintained is that
the consumer shall always have the financial
means to exercise full call on both the actuali-
ties and potentialities of production, we
establish a relation which is expressed by the
formula :

Price varies as : -j — -r .

Production — rate

Cost being taken as the unit,

q_

Price = Cost X C^ - P|^
at at

by which we arrive at the formula which is well
known in popular and sufficiently accurate form
to students of the new economics, namely, that
Price should equal Cost multiplied by Consump-
tion over Production.

In other words, we have shifted the pivot
round which the industrial system revolves.
Instead of running the industrial system to
produce a rigid financial result, which involves
the subordination, to it, of the true aim of
industry, we are now demanding that the
financial system shall be adjusted to produce
a desired distributive result. That is all there
is to it.

211

CITAI>TEFt III.

CHAPTER III

There are two hypotheses as to the method by
which changes of so far reaching a character as
those we have been discussing might come
about, one of which may be described as the
evolutionary method, and the second as the
revolutionary. For my own part I am in-
clined to believe in the probability of a com-
bination of the two.

The outstanding fact in regard to the
existing situation in the world at the present
time, is that it is unstable. No person whose
outlook upon life extends even so far as the
boundaries of his village, can fail to see that a
change is not merely coming, but is in progress ;
and it requires only a moderately comprehensive
perception of the forces which are active in
every country of the world to-day, to realise
that the change which is in progress must
proceed to limits to which we can set no
bounds.

214

SOCIAL CREDIT

That is to say, the break-up of the present
financial and social system is certain. Nothing
will stop it ; “Back to 1914 ” is sheer dreaming ;
the continuation of taxation on the present
scale, together with an imsolved employment
problem, is fantastic ; the only point at issue in
this respect is the length of time which the
break-up will take, and the tribulations we
have to undergo while the break-up is in
progress. But while recognising this, it is
also necessary not to fall into the error which
has its rise in Darwinism ; that change is
evolution, and evolution is ascent. It may
be ; but equally it may not be. That is where
the necessity for the revolutionary element
arises ; using, of course, the word revolutionary
in a constructive sense.

There will probably come well within the
lives of the present generation, a period at
which the blind forces of destruction will
appear to be in the ascendent. It does not
seem to me to be necessary that this should be
so, but it does seem to be probable.

There is, at the moment, no party, group or
individual possessing at once the power, the
215

SOCIAL CREDIT

knowledge and the will, which would transmute
the growing social unrest and resentment,
(now chiefly marshalled under the crudities of
Socialism and Communism), into a constructive
effort for the regeneration of Society. This
being the case, we are merely witnesses to a
succession of rear-guard actions on the part of
the so-called Conservative elements in Society,
elements which themselves seem incapable, or
undesirous of genuine initiative ; a process
which can only result, like all rear-guard
actions, in a successive, if not successful,
retreat on the part of the forces attaeked.
While this process is alone active, there seems
to be no sound justification for optimism ; but
it is difficult to believe that the whole world is
so bereft of sanity that a pause for reflection is
too much to hope for, pending a final resignation
to utter catastrophe.

When that pause occurs mankind will have
reached one of those crises which no doubt
have frequently been reached before, but which
so far have failed to avert the fall of humanity
back into an era of barbarism out of which
new civilisations have slowly and painfully

risen.

SOCIAL CREDIT

The position will be tremendous in its im-
portance. A comparatively short period will
probably serve to decide whether we are to
master the mighty economic and social machine
that we have created, or whether it is to master
us ; and during that period a small impetus
from a body of men who know what to do and
and how to do it, may make the difference
between yet one more retreat into the Dark
Ages, or the emergence into the full light of a
day of such splendour as we can at present
only envisage dimly.

It is this necessity for the recognition of the
psychological moment, and the fitting to that
moment of appropriate action, which should be
present in the minds of that small minority
which is seized of the gravity of the present times.
To have a clear understanding of the principles
which underlie the problem is essential to those
who may hope to play a part in its solution ;
it is even desirable that skeleton plans should
be in existence to meet the situation as it can
be seen to exist ; but nothing can be more fatal
to a successful issue than the premature publica-
tion of cut and dried arrangements which are
217

SOCIAL CREDIT

likely to be completely out of date long before
their adoption can be secured. As the world is
constituted to-day, efEective action is only
possible through certain centres of influence ;
that is to say, short of complete social anarchy
as a preliminary to a new world, it is necessary
to work through the arrangements which have
grown up in the system with which we are all
familiar.

While the evolutionary process depends most
probably on the formula to which the present
civilisation is working, and, given adherence to
that formula, is independent of human psycho-
logy, it is fairly obvious that the effectiveness
of “ constructive revolution ” does depend, to
a large extent, on this latter factor alone. In
other words, although we can float down the
Rapids and over the Falls without any strug-
gling either on our part or on the part of those
with whom we come in contact, the possibility
of avoiding that uncomfortable journey, if
there remains a possibility, requires definite
exertion. And if the cataract must be run, a
safe arrival on the waters of the placid lake
which may lie beyond, is surely conditionsd on
smne sort of expert na^dgation. If the present
218

SOCIAL CREDIT

onerous taxation is continued into an era of
rising prices, we shall not have long to wait.

There are certain factors operative in human
psychology which it is possible to recognise as
helpful or the reverse. During a recent visit
to New York I saw considerable numbers of
fervent men and women carrying sandwich
boards and collecting boxes through the financial
quarters in and around Wall Street, bearing on
them the legend, “ The Salvation Army is
Father Knickerbocker’s best friend.” It is
perhaps hardly necessary to explain that
Father Knickerbocker is generally taken to
represent the respectability of solid, or perhaps
preferably liquid capital. That is to say, it
may be taken as a scientific statement of fact
that one of the most dangerous opponents of a
better, cleaner world, is the sentimental spirit
which is entirely concerned with the beauties of
a prospective Heaven, whether that Heaven is
theological or moral. The head of the institu-
tion to which I have just referred, has recently
elaborated the preceding statement by an
intemperate attack on the “ dole,” basing his
objection to it on the “ demoralisation ” of the
219

SOCIAL CREDIT

recipient and not, of course, on the financial
jugglery which accompanies it— an attitude
entirely similar to that of the Puritan in his
abolition of bear-baiting ; not because it was
cruel to the bear, but because it gave pleasure
to the populace. The practical outcome of this
Puritanism is always negative. In short, there
is a type of sentiment which, under existing
conditions, is able to attain great respectability,
but which, can, with very little difficulty, be
identified with the formalism against which
the Great Reformer of nineteen hundred years
ago launched his most bitter invective; and
wherever that is found, the prospect of effective
assistance is not encouraging.

Again, it is only very rarely that we find a
response from those who have been “ successful
in business.” On the whole, the most pro-
mising type of mind is either that which has
always been free from financial anxiety and
yet, at the same time, is familiar with the
technique of the modem world, or, on the other
hand, the worker, whether by hand or brain,
whose incentive is very largely artistic in
origin, in the ranks of whom may of course be
220

SOCIAL CREDIT

included practically all persons of really
scientific temperament. Most unfortunately
this latter class is, of all the divisions of Society,
that least equipped, either by temperament or
organisation, to exercise effective pressure.

Since, however, most men are complex
characters, it is probably true that an effective
appeal can be made to a very large majority if
the appeal is made in the right way. It is my
considered opinion that the right way with
most people is to discountenance severely any
discussion of the general advisability of such
matters as we have been considering, and, as
far as possible, to put the appeal in the form :
“ Suppose that you yourself were offered
certain conditions, such as we suggest, under
which to carry on your business or your own
personal economic life, would you accept
them ? ”

With an overwhelming majority of persons
there is (no doubt as the result of the collective
hypnotism generally referred to as education),
a tendency to uphold a social ideal from which
their personal existence is a continuous effort
to escape. That is to say, their social ideals
321

SOCIAL CREDIT

and their social actions bear about the same
relation to each other that the aspirations of
the average individual in regard to an im-
mediate translation to Paradise, as expressed
on his occasional Sunday Church-going, do
to his wishes as expressed by his business
activity during the week, and his concern at
the onslaught of a cold in the head. If he can
be kept on the more or less solid ground of his
individual tastes, and the means which would
enable him to achieve them, he is amenable to
reason ; let loose on social ideals, and we
generally have something of about equal value
to the theology of the Salvation Army — ^a
thing which clearly has definite uses in connec-
tion with a given set of premises, but is not a
hopeful source from which to look for a new
direction of objective — ^is, in fact, frequently a
very vicious obstacle.

It hardly needs emphasis that a constant
binding back of proposals for reform, to the
moving events of the world, is of the utmost
value ; in fact, if it be possible to clarify the
relation between the analysis of the financial
system, the foci of discontent, and the logical
222

SOCIAL CREDIT

remedy, with sufl&cient emphasis and over a
sufficiently wide area, then the stage will be
set for the greatest victory which the human
individual has, vithin history, achieved over
the forces which beset him to his fall.